CAIA level 1 - Topic 2 Introduction to alts Study Guide with Complete Solutions
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Course
CAIA
Institution
CAIA
CAIA level 1 - Topic 2 Introduction to alts
Study Guide with Complete Solutions
4 types of alternative assets - Answer️️ -Alternatives are defined by
inclusion:
Real Assets
Hedge Funds
Private Equity
Structred products
Real Assets - Answer️️ -Direct ownership of non financial assets...
Return characteristics of alternatives - Answer✔️✔️-NIDI
Non-normality - do not follow bell curve (not easily modeled or predicted)
Illiquidity - investment trades infrequently and/or with low volume; often
nondivisible lumpy assets
Diversifiers - low correlation with traditional assets; absolute return
products
Inefficiency - market prices do not reflect all available information; may
lead to superior risk-adjusted performance
Methods of analysis - Answer✔️✔️-RSVP
- return computation - use cash flows due to lack of market values
- statistical - incorporate the non-normality of returns
- valuation - incorporate evaluation of fund managers, investment
illiquidity, unique cash flows & appraised valuation
- portfolio management - address non-normality and illiquidity
Other factors of alternatives - Answer✔️✔️-3is
Information asymmetries
Incomplete market
Innovation
3
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