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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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A hedge fund's risk manager is currently using historical data to predict the future volatility of their U.S. equities portfolio. They are considering enhancing their strategy by incorporating implied volatility from the equity assets. However, they are also assessing potential drawbacks to using this metric. Which of the following statements accurately describes a limitation of using implied volatility to predict future volatility?

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Explanation:

C is correct. Options are not actively traded on all assets; in these instances, reliable implied volatilities are not available.

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