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.