9. B is correct. A scenario limit establishes a limit on the loss for a given scenario, which is not
implemented by the policy drafted by Kyle. The 10-day, 2% VaR limit of $5 million is an
example of risk-budgeting. The initiation of hedges above a certain loss level is an alternative
form of a stop-loss limit called drawdown control or portfolio insurance. Section 5. LO.k.
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