30 Questions
Which asset prices are commonly affected by high-velocity geopolitical risks?
Stocks and bonds
What can sustained disruption due to low-velocity geopolitical risks result in?
Smaller revenues and higher costs
What is a basic rule of thumb for distinguishing signal from noise in geopolitical risk?
The distinction between politics and policy
What can high inflation and deteriorating employment potentially signal?
Political unrest
What can prompt a change in exchange rate policy for a country?
A pegged currency and rapidly declining export value
What can serve as meaningful signposts for geopolitical risk?
Political developments
What can be used to help identify potential red flags early for country-level economic conditions?
Data screens
What can be a key reason why asset prices in emerging and frontier markets are typically maintained at a discount to those in developed countries?
Higher risk premium
What can geopolitical risk analysis be translated into for the portfolio management process?
Investment action
What can determine the priority of geopolitical risks for an investor?
The likelihood, velocity, and impact of the risk
Which factor can affect an asset allocator's positioning in certain countries or regions?
All of the above
What may be considered more reliable investments based on their historical use of a multilateral approach?
Countries with long history of using a multilateral approach
Why may countries experiencing consistent military threat have lower economic and investment growth potential?
Due to consistent disruptions
In multifactor models, how can geopolitical risk be considered when assessing global car manufacturers?
As a factor affecting production diversity
What may be the impact of geopolitical risks on the confidence intervals around factors related to momentum, valuation, market sentiment, or the economic cycle?
They may increase the confidence intervals
What does the importance of geopolitical risk to the investment process depend on?
Investor objectives, risk tolerance, and time horizon
For an investor with low risk tolerance, what may be an appropriate approach to reducing exposure to geopolitical risk?
Investing in low-volatility choices
For an investor with a long time horizon, what may a geopolitical event like an exogenous shock be considered as?
A buying opportunity
For an investor nearing retirement, what may be the impact of a geopolitical event like an exogenous shock on their terminal portfolio value?
A major negative impact
What can changes in the style and momentum of international cooperation have on capital markets?
An important impact
Which of the following best describes a signpost in the context of risk management?
An indicator or event that signals a risk is becoming more or less likely
When signposts are flashing amber, what does it indicate?
Medium likelihood, velocity, or impact of a risk
What is the purpose of identifying signposts in risk management?
To differentiate signal from noise
In the context of risk management, what does it mean when signposts flash green?
No action needed
What is one important process in building a portfolio's resilience to unexpected change?
Developing plans for addressing priority risks
When might an action plan be necessary in risk management?
When a risk is high in likelihood, velocity, or impact
What is the role of good signposts in risk management?
To differentiate signal from noise
In the context of risk management, what does it mean when signposts flash red?
High likelihood, velocity, or impact of a risk
What is one example of a signpost mentioned in the text?
A scenario materializing
Before 2014, what did signposts for geopolitical risk in the United Kingdom flash?
Green
Test your knowledge on tracking risks and identifying signposts for priority risk in asset management. This quiz will assess your understanding of the processes involved in building portfolio resilience and reducing the impact of unexpected events on investment outcomes.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
