Final answer:
The effective approaches to managing market risk in real estate include diversification, hedging strategies, and risk transfer mechanisms. The combination of these strategies helps in mitigating the potential impact of market fluctuations, thereby protecting the investment portfolio.
Step-by-step explanation:
Approaches to managing or mitigating market risk in real estate include diversification of investment portfolios, hedging strategies, and risk transfer mechanisms. To elaborate, diversification involves spreading investments across various types of assets or markets to reduce exposure to any single asset or market.
Hedging strategies may include using financial instruments like futures, options, or swaps to offset potential losses. Lastly, risk transfer mechanisms can mean purchasing insurance or engaging in contractual agreements that shift risk to another party. Therefore, the correct answer is D) All of the above.