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Caia Level 1

Caia Level 1 Questions

Caia Level 1 Questions

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Cartes-fiches 253
Langue English
Catégorie Finances
Niveau Autres
Crée / Actualisé 10.02.2016 / 13.06.2022
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Chapter 30 - When is a portfolio dominant to another portfolio?

if it offers higher return with equal or less risk or if it offers lower risk with equal or higher expected return

Chapter 30 - efficient portfolios are expected to?

- Maximize exoected return within a risk class - Minimize risk within a return class
Chapter 30 - What are the 3 constraints subject for mean -variance optimized portfolios?

- target risk (variance) - portfolio sum = 100% - no short sale

Chapter 30 - What states the two -fund separation theorem?

all investors maximize their risk -return rate by investing in a risk -free fund and the diversified market fund

Chapter 30 - What is a hurdle rate regarding portfolio theory?

the minimum acceptable expected return that an asset can earn to be included in a portfolio

Chapter 30 - Why does mean -variance optimization (MVO) often fail to produce ex -post optimal portfolios?

- non -normality - nonstationarity - investment constraints: shortfall risk, tracking error, and illiquidity
Chapter 30 - What are the 3 extensions of the MVO (mean -variance optimization)?

- Black -Litterman approach - shrinkage techniques - additional constraints approach

Chapter 30 - The process of defining an acceptable amount of risk and then selecting portfolio weights based on the targeted, or budgeted risk refers to?

risk budgeting

Chapter 30 - A risk budgeting strategy that allocates risks equally across asset classes in the portfolio refers to?

Risk parity

Chapter 30 - What are the 3 steps to apply risk parity?

- define total risk of the portfolio - calculate marginal risk contribution of each asset class to the total risk of the portfolio - detemine portfolio weights
Chapter 31 - State 4 ways to seperate Alpha from Beta.

- futures contracts - swap contracts - options - long and short positions in indices using ETFs and cash products

Chapter 31 - State the process when using futures to offset small -cap risk and layer on the risk of the S&P500

- invest cash in the small -cap strategy to generate alpha - take short position in a small -cap index using futures contracts to offset small -cap risk - take long position in the S&P500 via S&P500 futures to layer on the risk exposure of large -cap stocks

Chapter 31 - exploiting opportunities to increase alpha while simultaneously managing beta exposure to a target level refers to?

Portable Alpha

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