CAIA - Chapter 20 Exam Questions and Answers 100% Verified

CAIA - Chapter 20 Exam Questions and Answers 100% Verified Equity long/short funds - answer- tend to have net positive systematic risk exposure from taking a net long position, with the long positions being larger than the short positions. Equity Market-neutral funds - answer- attempt to balance short and long positions, ideally matching the beta exposure of the long and short positions and leaving the fund relatively insensitive to changes in the underlying stock market index Short-bias funds - answer- have larger short positions than long positions, leaving a persistent net short position relative to the market index that allows these funds to profit during times of declining equity prices Liquidity - answer- is the extent to which transactions can be executed with minimal disruption to prices Anxious - answer- refers to market participants placing order, especially large orders, with more concern about getting the full order executed on a timely basis and less concern about getting the most favorable possible price based on short-term movements Talking Liquidity - answer- refers to the execution of market orders by a market participant to meet portfolio preferences that cause a decrease in the supply of limit orders immediately near the current best bid and offer prices. Market Maker - answer- is a market participant that offers liquidity, typically both on the buy side by placing bid orders and on the sell side by placing offer orders. - meets imbalances in supply and demand for shares caused by idiosyncratic trade orders. - typically, his purpose for providing liquidity is to earn the spread between the bid and offer prices by buying at the bid and selling at the offer price. Providing Liquidity - answer- refers to the placement of limit orders or other actions that increase the number of shares available to be bought or sold near the current best bid and offer prices Informationally efficient markets - answer- when security prices reflect available information Short Interest - answer- is the percentage of outstanding shares that are currently held short