Caia Level 1
Caia Level 1 Questions
Caia Level 1 Questions
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Lernkarten
Institutional structures refers to the financial markets and financial institutions related to a particular investment, such as whether the investment is publicly traded
real assets: institutional structure hedge fund: trading structure commodities: securitirs structure private equity: institutional structure structured products: securities structure
Illiquidity means that the investment trades infrequently / with low volume and that returns are difficult to observe due to lack of trading
risk: illiquid assets can be difficult to sell advantage: higher returns
efficiency refers to the tendency or market prices to reflect all available information. Inefficiency refers to the deviation of actual valuations from those valuations that would be anticipated in an efficient market
competition are less transaction costs are higher
securities structures and trading structures
They are not bell -shaped
Return computation methodologies for alternative investments are driven by their structures and can include concepts such as IRR. They also may take into account the effects of leverage.
Alternatie investments typically require familiarity statistical methods designed for nonnormality
active and rapide trading challenges impossed by the inability to observe transaction -based prices unique cash flow forecasting challenges
techniques designed to address returns of nonnormality (skewness, kurtosis) and barriers to continuous portfolio adjustments and liquidity management
Active management refers to efforts of buying and selling securities to earn superior combinations of risk and returns
Passive investing tends to focus on buying and holding securities in an effort to match the risk and return of a target
Active risk: risk that causes a portfolio's return to deviate from a benchmark due to active management Active return: difference between the return of a portfolio and its benchmark due to active management
An absolute returns standard means that returns are evaluated relative to zero. A relative return standard means that returns are evaluated relative to a benchmark
Arbitrage: simultaneous purchase and sale of indentical positions trading at different prices in different markets. Return enhancers: primary obejctive is superior average returns Return diversifiers: primary objective is reduction of portfolio risk
investments that exhibit risk and return characteristics that are acceptable to institutional investors (not very small or highly speculative)
- real estate - timberland - infrastructure investments - intangible assets
- ownership of the physical commodity - forwards and futures - securities of commodity producing firms - ETFs
Lumpy assets
- fewer participants - lower competition - higher transaction costs - inability to go short
- return computation methodology - valuation methodology - statistical methodology - portfolio management methodology
- Buy -Side Institutions - Sell -Side Institutions - Outside Service Providers
- plan sponsor - foundation - endowment - family office - sovereign / non -federal funds - alternative investments funds - seperately managed accounts SMAs
- dealer banks - retail brokers
- Prime broker - Auditors/accountants - Attorneys - Fund administrators - Hedge fund infrastructure - Consultants - Depositories/custodians - Commercial banks
In call markets, the stock is only traded at specific times. In continiuous markets, trades occur at any time the market is open
the third market
fourth market
- marketing and distribution regulations - establishment regulations - operational regulations - management regulations
(1) securities must be sold only to US accredited investors (2) seburities must not be marketed to the public
Section 3(c)(1) hedge funds has 100 or fewer investors in the fund Section 3(c)(7) hedge fund has fewer than 500 super -accredited investors in the fund
that only 50% of the value of a security can be purchased on margin
In the development, a real estate is improve / created and real estate development is significantly associated with uncertainty
1. Acquiring land 2. Forecasting revenues / costs 3. Deisgning the building 4. Approving through government 5. Raising capital 6. Building 7. Leasing
DCF
- market conditions - demand for space - competing developments - overall supply - quality of the building - time
potential gross inccome - vacancy losses (vacancy loss rate x petential gross income) = effective gross income - operating expenses (fixed and variable expenses) = NOI
Terminal Value
