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PRMIA Exam 8006 Topic 2 Question 73 Discussion
Topic #: 2
Which of the following statements is true:
1. The standard deviation of a short position is the same as the standard deviation of a long position
II. The expected return of a short position is the same as that a long position in the same asset
III. If two assets are perfectly positively correlated, then a short position in one and a long position in the other are negatively correlated
IV. If we increase the weight of an asset in a portfolio, its correlation with other assets in the portfolio scales up proportionately
Over the counter and electronic communication networks match buyers and sellers. However, there is no market making function, ie, in periods of stress liquidity may completely disappear from these markets. Exchanges normally have market makers that are required to present two way quotes on the securities they are making the market for. Therefore Choice 'a' is the correct answer.
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