CFA Level 3
Portfolio Management and Wealth Planning

Mitigating Credit Risk in Bond Investments

Hard Risk Management Credit Risk Management

As a portfolio manager at a wealth management firm, you are required to assess the credit risk associated with a new corporate bond investment for your clients. The bond is issued by a company that has a solid historical financial performance, yet recent newspaper reports indicate operational difficulties and management disputes that may affect the company's stability. In light of this information, you consider different approaches to evaluating the credit risk of this bond investment.

Which of the following strategies would most effectively mitigate your clients' credit risk exposure to this bond?

Hint

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