Consider a scenario where multiple portfolios have the same current market value. In the event of a sudden and widespread market downturn, which portfolio is most likely to experience the highest potential loss due to unforeseen risks?

Exam-Like

A portfolio of US Treasury notes with 2 to 5 years to maturity.

4.5%

A portfolio of long stock positions in an international large cap stock index combined with long put options on the same index.

11.8%

A portfolio of mezzanine tranche MBS structured by a large regional bank.

70.9%

A short position in futures for industrial commodities such as copper and steel.

12.7%

Financial Risk Manager Part 1