这道题怎么理解，解释一下

问题如下：

Question An analyst at a family endowment fund is studying the use of a factor analysis approach to hedge an investment portfolio. The analyst reviews the characteristics of factor analysis and best practices in implementing the approach. Which of the following statements is correct for the analyst to make?

选项：

A.

Factor betas can be used in the process of hedging idiosyncratic risk, but they cannot be used in hedging systematic risk.

B.

Choosing the frequency to adjust factor-based hedges requires making a decision that balances the hedging cost and the tracking error.

C.

Factor hedging performs well when linear factor models are used, but performs poorly when nonlinear factor models are used.

D.

While an investor can take positions in factors to construct a portfolio with a beta close to zero, the investor cannot theoretically construct a portfolio with a beta exactly equal to zero.

解释：

Explanation:

B is correct. Determining how often a hedge needs to be adjusted is a key challenge. There is a tradeoff between the cost of hedging and the need to keep the hedge aligned to the portfolio. If the hedging strategy is not implemented on a continuous basis, then tracking errors will appear. If the hedging strategy is updated too frequently, trading costs will be high and drag down overall performance.

A is incorrect. While idiosyncratic (i.e., specific) risk can theoretically be eliminated through diversification, the same is not true for systematic risk. However, factor betas can be used to construct a hedging strategy to eliminate systematic risk.

C is incorrect. Factor hedging could be based on either a linear or nonlinear model. Either could have a sound hedging effect. What is challenging is model risk, which includes both factor model errors and the potential for errors in implementation. Factor model errors occur when a model contains mathematical errors or is based on misleading/inappropriate assumptions. For example, a hedging strategy that is based on linear factor models that fail to capture nonlinear relationships among the factors will be flawed.

D is incorrect. The goal of hedging out all the factor risks and creating a zero-beta portfolio can theoretically be achieved by taking the opposite positions in each of the factors so that the combined portfolio contains no factor exposures. This is theoretically possible, although in practice some slight beta exposure might be left due to rounding the hedging instruments to the nearest single unit.

Section: Foundations of Risk Management

Learning Objective: Explain how to construct a portfolio to hedge exposure to multiple factors.

Reference: Global Association of Risk Professionals. Foundations of Risk Management. New York, NY: Pearson, 2022. Chapter 6. The Arbitrage Pricing Theory and Multifactor Models of Risk and Return.