CFA Level I · CFA Level I Exam · Introduction to Risk Management
In risk management, a risk driver is best described as:
A risk driver is a factor that causes exposure to a risk to change in size, such as interest rate or commodity price movements. It is the underlying source of uncertainty, unlike risk limits or hedging costs, which are responses to risk.
- Aa factor that causes exposure to a risk to change in sizeCorrect
- Ba limit set by the board on total losses
- Ca measure of the cost of hedging a risk
Explanation
A risk driver is an underlying source of uncertainty, such as interest rates or commodity prices, whose movements change the size of the loss or gain from an exposure. Risk limits and hedging costs are management responses or tools, not drivers.
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