Answer: Requiring returns to be within 5% of the return on the S&P 500 index.

## Explanation **Relative risk objectives** are those that measure risk relative to a benchmark or peer group, rather than in absolute terms. Let's analyze each option: **Option A: Aiming for a return in the top quartile relative to the peer group.** - This is a **relative return objective**, not a relative risk objective. It focuses on performance ranking rather than risk measurement. **Option B: Requiring returns to be within 5% of the return on the S&P 500 index.** - This is a **relative risk objective**. It establishes a risk constraint relative to a benchmark (S&P 500). The portfolio's returns must stay within a specified range of the benchmark's returns, which directly measures tracking error risk relative to the benchmark. **Option C: Setting the 12-month 95% value at risk (VaR) limit of a portfolio at ¥10 billion.** - This is an **absolute risk objective**. VaR measures the maximum potential loss in absolute monetary terms (¥10 billion) over a specific time horizon at a given confidence level, independent of any benchmark. ### Key Distinction: - **Absolute risk objectives**: Measure risk in standalone terms (e.g., VaR, standard deviation of returns, maximum drawdown). - **Relative risk objectives**: Measure risk relative to a benchmark (e.g., tracking error, information ratio, beta). Option B clearly establishes a relative risk constraint by limiting deviations from the benchmark return, making it the best description of a relative risk objective.

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