Managing Market Risk in a Diversified Equity Portfolio

As a portfolio manager for a high-net-worth individual, you are tasked with analyzing the market risk associated with a diversified equity portfolio. The client has expressed concerns about potential volatility due to macroeconomic factors, including interest rate changes and geopolitical tensions. Your analysis should focus on the following components:

1. Identify and explain at least two key market risk factors that could affect the portfolio.

2. Describe how you would measure this market risk and which tools or metrics you would employ.

3. Propose strategies to mitigate the identified risks while still aiming to achieve the client’s return objectives. Consider both derivative and non-derivative strategies in your response.