CAIA LEVEL 1 REVISION EXAMS TEST 2025/2026
QUESTIONS WITH ANSWERS TAGGED A+
✔✔large dealer banks - ✔✔Large dealer banks are major financial institutions, such as
Goldman Sachs, Deutsche Bank, and the Barclays Group, that deal in securities and
derivatives.
✔✔proprietary trading - ✔✔Proprietary trading occurs when a firm trades securities with
its own money in order to make a profit.
✔✔back office operations - ✔✔Back office operations play a supportive role in the
maintenance of accounts and information systems used to transmit and record
important market and trader information in all trading transactions, as well as in the
clearance and settlement of the trades.
✔✔front office operations - ✔✔Front office operations involve investment decision‐
making and, in the case of brokerage firms, contact with clients.
✔✔middle office operations - ✔✔Middle office operations form the interface between
the front office and the back office, with a focus on risk management.
✔✔prime broker - ✔✔The prime broker has the following primary functions: clearing and
financing trades for its client, providing research, arranging financing, and producing
portfolio accounting.
✔✔fund administrator - ✔✔The fund administrator maintains a general ledger account,
marks the fund's books, maintains its records, carries out monthly accounting, supplies
its monthly profit and loss (P&L) statements, calculates its returns, verifies asset
existence, independently calculates fees, and provides an unbiased, third‐party
resource for price confirmation on security positions.
✔✔financial platforms - ✔✔Financial platforms are systems that provide access to
financial markets, portfolio management systems, accounting and reporting systems,
and risk management systems.
✔✔commercial bank - ✔✔A commercial bank focuses on the business of accepting
deposits and making loans, with modest investment‐related services.
✔✔custodians - ✔✔Depositories and custodians are very similar entities that are
responsible for holding their clients' cash and securities and settling clients' trades, both
of which maintain the integrity of clients' assets while ensuring that trades are settled
quickly.
✔✔Depository Trust Company (DTC) - ✔✔The Depository Trust Company (DTC) is the
principal holding body of securities for traders all over the world and is part of the
, Depository Trust and Clearing Corporation (DTCC), which provides clearing, settlement,
and information services.
✔✔investment bank - ✔✔An investment bank focuses on providing sophisticated
investment services, including underwriting and raising capital, as well as other activities
such as brokerage services, mergers, and acquisitions.
✔✔universal banking - ✔✔Germany uses universal banking, which means that German
banks can engage in both commercial and investment banking.
✔✔limited liability company (LLC) - ✔✔A limited liability company (LLC) is a distinct
entity designed to offer its investors ('members') protection from losses exceeding their
investments absent fraud or other activities that could 'pierce the veil' between the
member's ownership interest in the LLC and the member's other holdings.
✔✔special purpose vehicle (SPV) - ✔✔A special purpose vehicle (SPV) is a legal entity
at the heart of a CDO structure that is established to accomplish a specific transaction,
such as holding the collateral portfolio.
✔✔feeder fund - ✔✔A feeder fund is a legal structure through which investors have
access to the investment performance of the master trust.
✔✔master trust - ✔✔The master trust is the legal structure used to invest the assets of
both onshore investors and offshore investors in a consistent if not identical manner, so
that both funds share the benefit of the fund manager's insights.
✔✔special purpose entity (SPE) - ✔✔A special purpose vehicle (SPV) or special
purpose entity (SPE) is a legal entity such as an LLC that serves a specific function,
often with the goal of being bankruptcy remote.
✔✔master‐feeder funds - ✔✔Master‐feeder funds are designed to provide efficient
access to investors who are subject to different taxation but wish to invest in the same
portfolio.
✔✔management company operating agreement - ✔✔A management company
operating agreement is an agreement between members related to a limited liability
company and the conduct of its business as it pertains to the law.
✔✔partnership agreement - ✔✔A partnership agreement is a formal written contract
creating a partnership.
✔✔private‐placement memoranda - ✔✔Private‐placement memoranda (a.k.a. offering
documents) are formal descriptions of an investment opportunity that comply with
federal securities regulations.
QUESTIONS WITH ANSWERS TAGGED A+
✔✔large dealer banks - ✔✔Large dealer banks are major financial institutions, such as
Goldman Sachs, Deutsche Bank, and the Barclays Group, that deal in securities and
derivatives.
✔✔proprietary trading - ✔✔Proprietary trading occurs when a firm trades securities with
its own money in order to make a profit.
✔✔back office operations - ✔✔Back office operations play a supportive role in the
maintenance of accounts and information systems used to transmit and record
important market and trader information in all trading transactions, as well as in the
clearance and settlement of the trades.
✔✔front office operations - ✔✔Front office operations involve investment decision‐
making and, in the case of brokerage firms, contact with clients.
✔✔middle office operations - ✔✔Middle office operations form the interface between
the front office and the back office, with a focus on risk management.
✔✔prime broker - ✔✔The prime broker has the following primary functions: clearing and
financing trades for its client, providing research, arranging financing, and producing
portfolio accounting.
✔✔fund administrator - ✔✔The fund administrator maintains a general ledger account,
marks the fund's books, maintains its records, carries out monthly accounting, supplies
its monthly profit and loss (P&L) statements, calculates its returns, verifies asset
existence, independently calculates fees, and provides an unbiased, third‐party
resource for price confirmation on security positions.
✔✔financial platforms - ✔✔Financial platforms are systems that provide access to
financial markets, portfolio management systems, accounting and reporting systems,
and risk management systems.
✔✔commercial bank - ✔✔A commercial bank focuses on the business of accepting
deposits and making loans, with modest investment‐related services.
✔✔custodians - ✔✔Depositories and custodians are very similar entities that are
responsible for holding their clients' cash and securities and settling clients' trades, both
of which maintain the integrity of clients' assets while ensuring that trades are settled
quickly.
✔✔Depository Trust Company (DTC) - ✔✔The Depository Trust Company (DTC) is the
principal holding body of securities for traders all over the world and is part of the
, Depository Trust and Clearing Corporation (DTCC), which provides clearing, settlement,
and information services.
✔✔investment bank - ✔✔An investment bank focuses on providing sophisticated
investment services, including underwriting and raising capital, as well as other activities
such as brokerage services, mergers, and acquisitions.
✔✔universal banking - ✔✔Germany uses universal banking, which means that German
banks can engage in both commercial and investment banking.
✔✔limited liability company (LLC) - ✔✔A limited liability company (LLC) is a distinct
entity designed to offer its investors ('members') protection from losses exceeding their
investments absent fraud or other activities that could 'pierce the veil' between the
member's ownership interest in the LLC and the member's other holdings.
✔✔special purpose vehicle (SPV) - ✔✔A special purpose vehicle (SPV) is a legal entity
at the heart of a CDO structure that is established to accomplish a specific transaction,
such as holding the collateral portfolio.
✔✔feeder fund - ✔✔A feeder fund is a legal structure through which investors have
access to the investment performance of the master trust.
✔✔master trust - ✔✔The master trust is the legal structure used to invest the assets of
both onshore investors and offshore investors in a consistent if not identical manner, so
that both funds share the benefit of the fund manager's insights.
✔✔special purpose entity (SPE) - ✔✔A special purpose vehicle (SPV) or special
purpose entity (SPE) is a legal entity such as an LLC that serves a specific function,
often with the goal of being bankruptcy remote.
✔✔master‐feeder funds - ✔✔Master‐feeder funds are designed to provide efficient
access to investors who are subject to different taxation but wish to invest in the same
portfolio.
✔✔management company operating agreement - ✔✔A management company
operating agreement is an agreement between members related to a limited liability
company and the conduct of its business as it pertains to the law.
✔✔partnership agreement - ✔✔A partnership agreement is a formal written contract
creating a partnership.
✔✔private‐placement memoranda - ✔✔Private‐placement memoranda (a.k.a. offering
documents) are formal descriptions of an investment opportunity that comply with
federal securities regulations.
