EOC Qns 2-"the most appropriate risk attribution approach for the fixed-income manager is to:
-Given answer is C-attribute tracking risk to relative allocation and selection decisions.
I relook to the itemset but there is no mention that the Fixed income portolio performance is relative to a benchmark? My initial thought is B can be the correct answer. Anyone has any thoughts?
@S2000magician response makes sense. However, I was able to eliminate answer B due to the answer mentioning “for each position”. This is a bottoms-up approach and based on the information, the FI manager is a top-down. That would have left A and C. With no mention of factors, I would most likely have eliminated that answer to arrive at choice C by default.
Thanks for asking this question as I literally wrote in my book, where is the reference to a benchmark and/or clarification of absolute target.
Hi @LethalSloth2020 , but the question mentions that “the fixed-income portfolio manager has strong views about the effects of macroeconomic factors”. Doesn’t this imply that the returns of the portfolio would be influenced by views on risk factors ?