* Investor Categories Based on Investable Assets
* Mass Affluent: $100,000-$1,000,000
* High-Net-Worth Individuals (HNWI): $1,000,000-$5,000,000
* Very-High-Net-Worth Individuals (VHNWI): $5,000,000-$30,000,000
* Ultra-High-Net-Worth Individuals (UHNWI): Over $30,000,000
* Why $900,000 Falls into HNWI?
* Although $900,000 is close to the HNWI threshold, the term is often used flexibly for individuals who are near the $1M mark.
* Banks and wealth managers generally consider $900,000 within this category because they have similar service needs.
* ICWIM Textbook, Chapter on Investor Profiling: Defines HNWI thresholds and explains their investment behavior.
* Wealth Management Industry Standards: High-net-worth classification begins near $1M.
ReferencesThus, the investor would normally be categorized as B. High-net-worth.

Standard deviation is a widely used measure of volatility, but it has a significant limitation: it is based on past data, which may not reflect future risks.
* Key Limitations of Standard Deviation:
* It only measures historical price fluctuations, not future risks.
* It assumes normal distribution, which may not hold in financial markets.
* It does not distinguish between upside and downside volatility.
* Alternative Measures of Risk:
* Value at Risk (VaR) - Estimates potential losses under extreme market conditions.
* Beta - Measures risk relative to the overall market.
* Sharpe Ratio - Assesses risk-adjusted returns.
# Reference: CFA Institute (Risk Metrics), CISI Wealth & Investment Management.

# Reference: Eugene Fama (EMH Theory), CISI Wealth & Investment Management.

Equity arbitrage strategies involve balancing betas to hedge risk while profiting from pricing inefficiencies.
* Key Concept:
* Beta measures systematic risk (market-related risk).
* Equity arbitrage strategies aim to neutralize beta while profiting from pricing anomalies.
* Example:
* A hedge fund buys an undervalued stock and shorts an overvalued stock with matching betas
, ensuring market-neutral exposure.
# Reference: CFA Institute (Hedge Fund Strategies), CISI Wealth & Investment Management.

Stablecoins are cryptocurrencies pegged to stable assets (e.g., USD, gold) and backed by reserves such as treasury bonds and commercial paper.
* Why is Option B Correct?
* If stablecoins faced mass withdrawals, they would need to liquidate large amounts of treasury securities or corporate debt.
* This could trigger a liquidity crisis, impacting financial markets.
* Example: The TerraUSD collapse in 2022 showed the risks of unstable reserves.
* Why Not Other Options?
* A (Cyber breach risk) # Security is important but not the biggest risk.
* C (Not fiat money) # True, but this is not a risk, just a definition.
* D (Banks not buying assets) # Banks may invest in reserves, but stablecoins operate outside traditional banking.
# Reference: Bank for International Settlements (Stablecoin Risks), CISI Wealth & Investment Management.