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Basic Question 1 of 5
Shortfall risk is defined as ______.
B. the probability that the mean return on a portfolio will fall below some minimum acceptable level over some time period
C. the probability that a portfolio value will always be below some minimum acceptable level over some time period
A. the probability that a portfolio value will fall below some minimum acceptable level over some time period
B. the probability that the mean return on a portfolio will fall below some minimum acceptable level over some time period
C. the probability that a portfolio value will always be below some minimum acceptable level over some time period
User Contributed Comments 2
| User | Comment |
|---|---|
| fahad | It is the opposite of Z formula in the numerator and also replace mean with minum acceptable level of return denoted as RL. |
| bobert | It isn't the opposite of the z-formula. z-value = (X-mean) / std dev. SFRatio = (Rp-RL) / std dev. Both formulas look to get an answer that is relative to standard deviation units. Therefore on a normal distribution, you use the SFRatio as a z-value to determine the F(X) |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
define shortfall risk, calculate the safety-first ratio, and identify an optimal portfolio using Roy's safety-first criterion
CFA® 2025 Level I Curriculum, Volume 1, Module 5.