Answer: III and IV

## Explanation Let's analyze each statement: **I. Under the cash flow mapping approach, only the risk associated with the average maturity of a fixed-income portfolio is mapped.** - **Incorrect**: Cash flow mapping actually maps each individual cash flow to appropriate maturity vertices, not just the average maturity. This makes it more precise than duration mapping. **II. Cash flow mapping is the least precise method of risk mapping for a fixed-income portfolio.** - **Incorrect**: Cash flow mapping is actually one of the most precise methods as it considers individual cash flows. Principal component mapping and duration mapping are generally less precise. **III. Under the duration mapping approach, the risk of a bond is mapped to a zero-coupon bond of the same duration.** - **Correct**: Duration mapping simplifies the bond's risk by mapping it to a zero-coupon bond with equivalent duration, which captures the interest rate sensitivity. **IV. Using more risk factors generally leads to better risk measurement but also requires more time to be devoted to the modeling process and risk computation.** - **Correct**: More risk factors provide better granularity and accuracy in risk measurement, but increase computational complexity and modeling time. Therefore, only statements **III and IV** are correct, making option **C** the correct answer.

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