Explanation:
Absolute risk refers to the risk of a dollar loss over a given horizon, and it is sometimes called asset risk. Relative risk refers to the risk of a dollar loss in a fund relative to its benchmark. Therefore, option B correctly differentiates the two terms.
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Q.3028 Differentiate between absolute risk and relative risk.
A
Absolute risk is the risk of dollar loss owing to the policy mix selected by the fund; relative risk is the risk of dollar loss over the horizon and may also be called asset risk.
B
Absolute risk is the risk of a dollar loss over the horizon and is sometimes called asset risk; relative risk is the risk of a dollar loss in a fund relative to its benchmark.
C
Absolute risk is the risk of dollar loss in a fund relative to its benchmark; relative risk is the risk of dollar loss owing to the policy mix selected by the fund.
D
Absolute risk is the risk of dollar loss in a fund relative to its benchmark and sometimes is called asset risk; relative risk is the risk of a dollar loss over the horizon.
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