CAIA Level 1 Glossary Exam Study Guide with Complete Solutions
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Course
CAIA
Institution
CAIA
CAIA Level 1 Glossary Exam Study
Guide with Complete Solutions
absolute return products - Answer️️ -Absolute return products are
investment products viewed as having little or no return correlation with
traditional assets, and have investment performance that is often analyzed
on an absolu...
CAIA Level 1 Glossary Exam Study
Guide with Complete Solutions
absolute return products - Answer✔️✔️-Absolute return products are
investment products viewed as having little or no return correlation with
traditional assets, and have investment performance that is often analyzed
on an absolute basis rather than relative to the performance of
traditional investments.
absolute return standard - Answer✔️✔️-An absolute return standard means
that returns are to be evaluated relative to zero, a fixed rate, or relative to
the riskless rate, and therefore independently of performance in equity
markets, debt markets, or any other markets.
active management - Answer✔️✔️-Active management refers to efforts of
buying and selling securities in pursuit of superior combinations of risk
and return.
active return - Answer✔️✔️-Active return is the difference between the
return of a portfolio and its benchmark that is due to active management.
active risk - Answer✔️✔️-Active risk is that risk that causes a portfolio's
return to deviate from the return of a benchmark due to active
management.
alternative investments - Answer✔️✔️-Alternative investments are
sometimes viewed as including any investment that is not simply a long
position in traditional
investments.
benchmark - Answer✔️✔️-A benchmark is a performance standard for a
portfolio that reflects the preferences of an investor with regard to risk and
return.
benchmark return - Answer✔️✔️-A benchmark return is the return of the
benchmark index or benchmark portfolio.
commodities - Answer✔️✔️-Commodities are homogeneous goods available
in large quantities, such as energy products, agricultural products, metals,
and building materials.
compensation structure - Answer✔️✔️-Compensation structure refers to the
ways that organizational issues, especially compensation schemes,
influence particular investments.
distressed debt - Answer✔️✔️-Distressed debt refers to the debt of
companies that have filed or are likely to file in the near future for
bankruptcy protection.
diversifier - Answer✔️✔️-A diversifier is an investment with a primary
purpose of contributing diversification benefits to its owner.
efficiency - Answer✔️✔️-Efficiency refers to the tendency of market prices to
reflect all available information.
farmland - Answer✔️✔️-Farmland consists of land cultivated for row crops
(e.g., vegetables and grains) and permanent crops (e.g., orchards and
vineyards).
financial asset - Answer✔️✔️-A financial asset is not a real asset—it is a
claim on cash flows, such as a share of stock or a bond.
hedge fund - Answer✔️✔️-A hedge fund as a privately organized
investment vehicle
that uses its less regulated nature to generate investment
opportunities that are substantially distinct from those offered by
traditional investment vehicles, which are subject to regulations such as
those restricting their use of derivatives
and leverage.
illiquidity - Answer✔️✔️-Illiquidity means that the investment trades
infrequently or with low volume (i.e., thinly).
incomplete markets - Answer✔️✔️-Incomplete markets refer to markets with
insufficient distinct
investment opportunities.
inefficiency - Answer✔️✔️-Inefficiency refers to the deviation of actual prices
from valuations that would be anticipated in an efficient market.
information asymmetries - Answer✔️✔️-Information asymmetries refer to
the extent to which market participants possess different data and
knowledge.
infrastructure investments - Answer✔️✔️-Infrastructure investments are
claims on the income of toll roads, regulated utilities, ports, airports, and
other real assets
that are traditionally held and controlled by the public sector
(i.e., various levels of government).
institutional structure - Answer✔️✔️-Institutional structure refers to the
financial markets and financial institutions related to a particular
investment, such as
whether the investment is publicly traded.
institutional-quality investment - Answer✔️✔️-An institutional-quality
investment is the type of investment that financial institutions such as
pension funds or
endowments might include in their holdings because they are
expected to deliver reasonable returns at an acceptable level
of risk.
investment - Answer✔️✔️-An investment is that it is deferred consumption.
Any net outlay of cash made with the prospect of receiving future
benefits might be considered an investment.
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