PFMP · Question #739
You prepared a portfolio risk management plan when you replaced the previous portfolio manager three years ago. However, recent structural and execution risks have affected the portfolio adversely…
The correct answer is B. Portfolio algorithms. Portfolio algorithms are mathematical and analytical models used to evaluate and optimize portfolio components-such as risk-adjusted return models, scoring algorithms, and optimization formulas. These are considered portfolio process assets because they are reusable tools…
Question
You prepared a portfolio risk management plan when you replaced the previous portfolio manager three years ago. However, recent structural and execution risks have affected the portfolio adversely, resulting in lost opportunities and a decrease in overall return on investment. You are updating the risk management plan as now stakeholders can see its value. In doing so, you can use some portfolio process assets such as:
Options
- ALessons learned
- BPortfolio algorithms
- CVision statements
- DRisk categories
How the community answered
(34 responses)- A6% (2)
- B79% (27)
- C12% (4)
- D3% (1)
Explanation
Portfolio algorithms are mathematical and analytical models used to evaluate and optimize portfolio components-such as risk-adjusted return models, scoring algorithms, and optimization formulas. These are considered portfolio process assets because they are reusable tools embedded in the organization's portfolio management processes. When updating a risk management plan after adverse structural and execution risks, portfolio algorithms provide the quantitative analytical foundation for reassessing risk. Option A (lessons learned) are knowledge assets that inform the update but are not classified as portfolio process assets in the PMI framework. Option C (vision statements) are strategic artifacts. Option D (risk categories) are part of the risk management plan being updated, not an asset used to update it.
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