Caia Level 1
Caia Level 1 Questions
Caia Level 1 Questions
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Cartes-fiches
Disclosure of Conflicts Priority of Transactions Referral Fees
Conduct as Members and Candidates in the CFA Program Reference to CFA Institute, the CFA Designation, and the CFA Program
Traditional investments include long positions in equities, fixed income, and cash
Real assets Hedge funds Commodities Private Equity (including mezzanine and distressed debt) Structured Products (including credit derivatives)
real assets focuses on investments in which the underlying assets involve direct ownership of nonfinancial assets
Timberland, raw land and farmland
Hedge funds are less regulated than trad. Investments
Venture capital Leveraged buyouts Mezzanine debt Distressed debt
Private equity includes both equity and debt positions that, among other things, are not publicly traded
debt and equity securities
Collateralized debt obligations CDOs Credit derivatives
Regulatory structures Securities structures Trading structures Compensations structures Institutional structures
Regulatory structure refers to the role of government, including both regulation and taxation, in influecing the nature of an investment
Securities structure refers to the structuring of cash flows through securitization. Securitization is the process of transforming asset ownership into tradeable units
Trading structure refers to the role of an investment vehicle's investment managers in developing and implementing trading strategies
Conpensation structure refers to the ways that organizational issues, especially compensation schemes, influence particular investments
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
