Answer: From the plan sponsor's perspective, nominal pension obligations are similar to a short position in a bond.

## Explanation Let's analyze each option: **Option A**: "A pension plan's total VaR is equal to the sum of its policy-mix VaR and active management VaR." - **Incorrect** - Total VaR is not simply the sum of policy-mix VaR and active management VaR because these components may be correlated. The correct relationship involves considering the covariance between them. **Option B**: "Pension fund risk analysis does not consider performance relative to a benchmark." - **Incorrect** - Pension fund risk analysis absolutely considers performance relative to benchmarks, as tracking error and benchmark-relative risk are key metrics in pension fund management. **Option C**: "In most defined-benefit pension plans, if liabilities exceed assets, the shortfall does not create a risk for the plan sponsor." - **Incorrect** - In defined-benefit plans, the plan sponsor bears the risk of funding shortfalls. If liabilities exceed assets, the sponsor must make additional contributions to cover the deficit. **Option D**: "From the plan sponsor's perspective, nominal pension obligations are similar to a short position in a bond." - **Correct** - This is accurate because pension obligations represent future liabilities that must be paid, similar to being short a bond where the sponsor owes fixed payments. The sponsor is effectively short the liability stream and long the assets that fund those liabilities. The correct answer is **D**.

Author: LeetQuiz .