Financial Risk Manager Part 2
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To provide a detailed understanding of the relationship between asset performance and volatility, consider a report prepared by a risk analyst at a bank. This report is based on an empirical analysis spanning three decades, during which asset class returns were compared to shifts in market volatility. Which statement accurately reflects the findings regarding this connection?
A
Currency strategies such as currency carry trades tend to perform poorly during periods of high volatility.
B
When volatility is rising, all assets are either positively or negatively affected, with the exception of risk-free bonds.
C
Whether the relationship between stock returns and volatility is positive or negative depends on the phase of the business cycle.
D
When volatility is rising, stock returns tend to increase but bond returns tend to decrease.