CAIA Level I Exam - Fall 2019 Flashcards
Preparation for passing the level I examination (based on the 3rd edition material)
Define investment?
Ch. 1
Deferred consumption.
List four major types of real assets other than land and other types of real estate.
Ch. 1
Natural resources, commodities, infrastructure and intellectual property.
List the three major types of alternative investments other than real assets in the CAIA curriculum.
Ch. 1
Hedge funds,
private equity,
structured products.
Name the five structures that differentiate traditional and alternative investments.
Ch. 1
Regulatory structures, security structures, trading structures, compensation structures, institutional structures.
Which of the five structures that differentiate traditional and alternative investments relates to the taxation of an instrument?
Ch. 1
Regulatory structure.
Name the four return characteristics that differentiate traditional and alternative investments.
Ch. 1
Diversification,
illiquidity,
inefficiency,
non-normality.
Name four major methods of analysis that distinguish alternative investments from traditional investments.
Ch. 1
Return compensation methods,
statistical methods,
valuation methods,
portfolio management methods.
Describe an incomplete market.
Ch. 1
Incomplete markets refer to markets with insufficient distinct investment opportunities.
Define active management.
Ch. 1
Active management refers to efforts of buying and selling securities in pursuit of superior combinations of risk and return.
What distinguishes use of the term pure arbitrage from the more general use of the term arbitrage?
Ch. 1
“Pure arbitrage” is the attempt to earn RISK-FREE PROFITS through the simultaneous purchase and sale of identical positions trading at different prices in different markets.
The more general usage of the “arbitrage” represents efforts to earn superior returns even when RISK IS NOT ELIMINATED because the long and short positions are not in identical assets or are not held over the same time intervals.
What are real assets?
Ch. 1
Real assets are investments in which the underlying assets involve direct ownership of non-financial assets rather than ownership through financial assets.
What are managed futures?
Ch. 1
The term managed futures refers to the active trading of futures and forward contracts on physical commodities, financial assets and exchange rate.
What is private equity, as defined in the CAIA curriculum?
Ch. 1
Equity and debt positions that, among other things, are not publicly traded.
What is mezzanine debt?
Ch. 1
Mezzanine debt refers to the spectrum of risky claims that exists between the “ceiling” of senior secured debt and the “floor” of equity in the capital structure of a firm.
Define structured products?
Ch. 1
Instruments that are designed to exhibit particular return, risk, taxation or other attributes.
