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Select from two popular options -

  • Complete Course - Structured coverage of all Topics in the curriculum and essential faculty access.
  • Course by Topic - Select courses on specific CAIA exam Topics.

Complete Course # of Lectures Length
  • All lectures for Topic 1 to Topic 7
  • On-demand course recordings
  • Weekly faculty workshops: Wednesdays, 5 Dec to 20 Feb
14 33.5 hours $499

Course by Topic - Select courses based on individual Topics listed below.
Topic 1:  Professional Standards and Ethics moremore less 1 2 hours $49
Standards  I-VI
  • Demonstrate knowledge of Standard I: Professionalism.
  • Knowledge of the Law
  • Loyalty, Prudence, and Care
  • Material Nonpublic Information
  • Loyalty
  • Disclosure of Conflicts
  • Diligence and Reasonable Basis
  • Communication with Clients and Prospective Clients
  • Priority of Transactions
  • Additional Compensation Arrangements
  • Market Manipulation
  • Fair Dealing
  • Independence and Objectivity
  • Demonstrate knowledge of Standard II: Integrity of Capital Markets.
  • Demonstrate knowledge of Standard III: Duties to Clients.
  • Misrepresentation
  • Suitability
  • Responsibilities of Supervisors
  • Referral Fees
  • Record Retention
  • Performance Presentation
  • Misconduct
  • Demonstrate knowledge of Standard IV: Duties to Employers.
  • Demonstrate knowledge of Standard V: Investments Analysis, Recommendations, and Action.
  • Preservation of Confidentiality
  • Demonstrate knowledge of Standard VI: Conflicts of Interest.
Topic 2:  Introduction to Alternative Investments moremore less 3 9 hours $149
Chapter 1 -  What is an Alternative Investment?
  • Demonstrate knowledge of the view of alternative investments by exclusion.
  • Demonstrate knowledge of various alternative investment types.
  • Demonstrate knowledge of the concept of structures in investments.
  • Recognize characteristics of institutional quality investments
  • Demonstrate knowledge of how alternative and traditional investments are distinguished by return characteristics.
  • Demonstrate knowledge of how alternative and traditional investments are distinguished by methods of analysis.
  • Demonstrate knowledge of other factors that distinguish alternative investments from traditional investments.
  • Demonstrate knowledge of the goals of alternative investing.
Chapter 2 -  The Environment of Alternative Investments
  • Demonstrate knowledge of participants in the alternative investing environment.
  • Describe real assets (i.e., commodities, real estate, intellectual property, and infrastructure), and distinguish real assets from financial assets
  • Recognize characteristics of institutional quality investments
  • Define and explain the concept of systemic risk
  • Define liquid alternative investments
  • Recognize income tax conventions (e.g., taxes on capital gains, dividends, interest)
  • Recognize non–income tax conventions (e.g., real estate tax, estate tax, value-added tax)
  • Recognize the five distinct types of liquid alternative investments
  • Recognize the four primary forms of hedge fund regulation
  • Describe hedge funds
  • Demonstrate knowledge of the financial markets involved in alternative investments.
  • Demonstrate knowledge of the regulatory environment as it applies to alternative investments.
  • Describe private equity (i.e., venture capital, leveraged buyouts, mezzanine debt, and distressed debt)
  • Describe key components of U.S. regulations affecting securities issued to the public (e.g., the ’40 Act, the U.S. Securities Act), including exemptions commonly applied to hedge funds
  • Recognize how variations in income tax conventions around the world affect investments and investment decisions
  • Describe key components of European regulations affecting hedge funds (e.g., Undertakings for Collective Investment in Transferable Securities [UCITS] directives, Markets in Financial Instruments Directive [MiFID]), and recognize major European regulatory institutions
  • Describe structured products (e.g., collateralized debt obligations [CDOs], credit derivatives)
  • Demonstrate knowledge of liquid alternative investments.
  • Demonstrate knowledge of taxation of investments.
  • Describe key components of hedge fund regulations outside the United States and European Union (e.g., Australia, Brazil, Canada, Japan, Singapore, South Africa, the United Arab Emirates), and recognize major regulatory institutions in these regions
  • Describe the factors driving the growth of liquid alternative investments
  • Recognize regulatory constraints that affect liquid alternative investments
Chapter 3 -  Quantitative Foundations
  • Demonstrate knowledge of return and rate mathematics.
  • Define and calculate the IRR
  • Recognize complex cash flow patterns, and discuss their effect on the computation and interpretation of IRRs
  • Define and apply return compounding
  • Recognize and apply the concept of forward contracts
  • Explain the distribution of cash waterfall provision of a limited partnership agreement
  • Define and apply the concepts of notional principal and full collateralization for forward contracts
  • Define and calculate logarithmic returns
  • Discuss the challenges (e.g., scale differences) of comparing investments based on IRRs
  • Define and calculate the four types of IRR based on time periods for which cash flows are available (i.e., lifetime, since inception, interim, and point-to-point) and their relationship to valuation of alternative investments
  • Demonstrate knowledge of returns based on notional principal.
  • Demonstrate knowledge of the internal rate of return (IRR) approach to alternative investment analysis.
  • Discuss the difficulties of aggregating IRRs
  • Define and apply the return computation interval
  • Recognize terminology associated with the cash waterfall provision (e.g., carried interest, hurdle rate, catch-up provision, vesting, clawback clause)
  • Discuss factors (e.g., management fees, incentive-based fees) to consider in a fund’s compensation structure and the potential effects of decisions regarding compensation structure
  • Aggregate returns over different time intervals
  • Discuss the reinvestment assumption inherent in the IRR and how it is addressed by the modified IRR
  • Demonstrate knowledge of problems with the use of IRR in alternative investment analysis.
  • Demonstrate knowledge of the distribution of cash waterfall.
  • Compare and calculate time-weighted and dollar-weighted returns
  • Define and calculate arithmetic mean log returns and geometric mean returns
  • Calculate the log return to a fully collateralized derivatives position
  • Calculate the log return to a partially collateralized derivatives position
  • Discuss and calculate fund-as-a-whole carried interest and deal-by-deal carried interest
  • Define and apply clawback provisions
  • Compare and apply hard and soft hurdle rates and their sequences of distribution
  • Discuss the potential effects of incentive fees on decision-making, and their optionlike nature
Chapter 4 -  Statistical Foundations
  • Demonstrate knowledge of the characteristics of return distributions.
  • Recognize the importance of correlation in alternative investment portfolio management
  • Explain the first four raw moments of return distributions
  • Recognize ex ante and ex post return distributions
  • Define and explain return standard deviation (volatility)
  • Identify various measures used in time-series models (e.g., price levels, price variation, risk)
  • Recognize the three main reasons for non-normality observed in alternative investment returns (i.e., autocorrelation, illiquidity, and nonlinearity), and discuss the effect of each on returns
  • Discuss tests for normality that use sample moments
  • Describe the properties of return variance and standard deviation
  • Recognize the importance of the normal distribution in statistical analysis
  • Explain the central moments of return distributions
  • Define and calculate covariance
  • Demonstrate knowledge of moments of return distributions (i.e., mean, variance, skewness, and kurtosis).
  • Demonstrate knowledge of various measures of correlation of returns.
  • Define and calculate correlation coefficient
  • Explain skewness of return distributions
  • Describe the characteristics of lognormal distributions
  • Calculate return variance and standard deviation
  • Define the concepts of heteroskedasticity and homoskedasticity
  • Recognize and apply the Jarque-Bera test
  • Recognize the key components of the generalized autoregressive conditional heteroskedasticity (GARCH) method
  • Explain kurtosis and excess kurtosis of return distributions
  • Demonstrate knowledge of standard deviation (volatility) and variance.
  • Demonstrate knowledge of methods used to test for normality of distributions.
  • Describe the characteristics of platykurtic, mesokurtic, and leptokurtic distributions
  • Describe how the GARCH method is used to model risk evolution through time
  • Contrast the GARCH method with the autoregressive conditional heteroskedasticity (ARCH) method
  • Demonstrate knowledge of time-series return volatility models.
  • Define and calculate the Spearman rank correlation coefficient
  • Discuss the role of correlation in portfolio diversification
  • Define and calculate beta in the context of the CAPM
  • Define and calculate autocorrelation
  • Define and apply the Durbin-Watson test
Chapter 5 -  Measures of Risk and Performance
  • Demonstrate knowledge of measures of financial risk.
  • Define and calculate semivariance and semistandard deviation
  • Apply a parametric approach to estimate VaR with normally distributed returns or with normally distributed underlying factors
  • Define the risk-adjusted performance measure type
  • Define the ratio-based performance measure type
  • Define and calculate the Sharpe ratio
  • Recognize and calculate Jensen’s alpha, M2 (M-squared), and average tracking error
  • Describe methods for estimating volatility as an input for VaR calculations
  • Describe shortfall risk, target semivariance, and target semistandard deviation
  • Demonstrate knowledge of methods for estimating value at risk (VaR).
  • Demonstrate knowledge of ratio-based performance measures used in alternative investment analysis.
  • Describe methods for estimating VaR for leptokurtic positions
  • Define and calculate the Treynor ratio
  • Recognize and calculate the Sortino ratio, the information ratio, and return on VaR
  • Demonstrate knowledge of risk-adjusted performance measures used in alternative investment analysis.
  • Define the risk-adjusted performance measure type
  • Define and calculate tracking error
  • Describe and calculate drawdown
  • Define and interpret value at risk (VaR), and discuss its strengths and weaknesses as a risk measure
  • Describe methods for estimating VaR directly from historical data
  • Describe how the Monte Carlo analysis can be used to estimate VaR
  • Define and interpret conditional value-at-risk (CVaR)
  • Discuss and apply the aggregation of portfolio-component VaRs to determine the VaR for a portfolio under various assumptions (i.e., perfect correlation, zero correlation, and perfect negative correlation)
Chapter 6 -  Foundations of Financial Economics
  • Demonstrate knowledge of the concept of informational market efficiency.
  • Define informational market efficiency
  • Describe the key characteristics of single-factor asset pricing models
  • Apply and interpret equations representing ex ante and ex post forms of multifactor asset pricing models
  • Identify the two determinants of forward prices on a risky financial security
  • Describe arbitrage-free models
  • Recognize the key characteristics of long and short positions in an underlying asset
  • Recognize and describe the five most popular option sensitivities (i.e., delta, vega, theta, rho, and gamma)
  • Recognize and apply the Black-Scholes call-option formula
  • Recognize and apply the Black forward option pricing model
  • Recognize the key characteristics of call and put exposures
  • Discuss applications of arbitrage-free models
  • Compare the pricing of forward contracts on financial securities and commodities
  • Distinguish between theoretically derived and empirically identified return factors
  • Recognize the capital asset pricing model (CAPM)
  • Recognize various forms of informational market efficiency
  • Demonstrate knowledge of single-factor asset pricing models and ex ante pricing.
  • Demonstrate knowledge of multifactor and empirical asset pricing models.
  • Identify factors driving informational market efficiency
  • Describe the key characteristics of ex ante and ex post asset pricing models
  • Describe the steps typically involved in empirical modeling of returns
  • Apply the cost-of-carry model for pricing forward contracts on financial securities
  • Describe arbitrage-free pricing in spot markets
  • Discuss characteristics of option spreads
  • Recognize and apply the currency option pricing model
  • Define bull and bear spreads
  • Describe hedged and unhedged carry trades
  • Recognize the key components of the Fama-French and Fama-French-Carhart models, and discuss the appropriate application of these models in alternative investing
  • Recognize the distinctions between ex ante asset pricing and ex post asset pricing
  • Discuss the differences between informational market efficiency in traditional and alternative asset markets
  • Demonstrate knowledge of arbitrage-free financial models.
  • Demonstrate knowledge of the term structure of forward contracts.
  • Apply ex ante and ex post pricing in a single-factor framework
  • Discuss three key issues analysts should consider when using empirical multifactor models
  • Define forward contracts, and recognize their uses in hedging
  • Discuss option combinations
  • Discuss option sensitivities
  • Discuss the uses of option sensitivities in risk management
  • Define and apply the concept of put-call parity
  • Recognize and apply cost-of-carry models
  • Define systematic and idiosyncratic risk and return
  • Demonstrate knowledge of option exposures.
  • Demonstrate knowledge of option pricing models.
  • Discuss and apply binomial tree models
  • Demonstrate knowledge of option sensitivities.
Chapter 7 -  Benchmarking and Performance Attribution
  • Demonstrate knowledge of benchmarking and its role in the analysis of risk and return of investments.
  • Define benchmarking in the context of investing
  • Define normative and positive models, and compare their key characteristics
  • Recognize and describe multiperiod issues in CAPM analysis
  • Describe the characteristics of single-factor models
  • Demonstrate knowledge of various types of asset pricing models.
  • Demonstrate knowledge of various approaches to performance attribution.
  • Recognize and describe the limitations of CAPM analysis when applied to non-normal return distributions in alternative investments
  • Define theoretical and empirical models, and compare their key characteristics
  • Recognize various types of benchmarks (i.e., peer returns and index returns)
  • Apply single-factor models to benchmarking
  • Demonstrate knowledge of the limitations of the CAPM approach for analysis of alternative investments.
  • Apply the concept of benchmarking
  • Define applied and abstract models, and compare their key characteristics
  • Describe the potential effect of illiquidity on returns of alternative investments
  • Interpret the results of single-factor benchmarking analysis
  • Discuss multifactor benchmarking
  • Describe the advantages and disadvantages of various types of models in the context of alternative investments
  • Discuss considerations in benchmarking (appropriateness of the benchmark selected, statistical significance of performance differences relative to a benchmark, reasons behind performance differences relative to a benchmark)
  • Define cross-sectional and time-series approaches, and compare their key characteristics
Chapter 8 -  Alpha, Beta, and Hypothesis Testing
  • Demonstrate knowledge of beta and alpha.
  • Discuss the classification of assets into beta drivers and alpha drivers
  • Recognize the role of beta in the analysis of traditional and alternative investments
  • Define and apply the concept of ex ante alpha, and identify its key characteristics
  • Identify the steps involved in estimating ex ante alpha from historical performance
  • Calculate beta, ex ante, and ex post alpha
  • Recognize the characteristics of return persistence
  • Recognize the role of alpha in the analysis of traditional and alternative investments
  • Demonstrate knowledge of the concepts of ex ante and ex post alpha.
  • Demonstrate knowledge of empirical approaches to inferring ex ante alpha from ex post alpha.
  • Discuss the characteristics of beta drivers and their behavior over time
  • Recognize the three primary types of model misspecification (i.e., omitted systematic return factors, misestimated betas, and nonlinear risk-return relationships) and their effects on return attribution
  • Discuss challenges to empirical analysis of manager skill
  • Define and apply the concept of ex post alpha, and identify its key characteristics
  • Define abnormal return persistence
  • Demonstrate knowledge of return attribution.
  • Demonstrate knowledge of ex ante alpha estimation and return persistence.
  • Demonstrate knowledge of return drivers.
  • Discuss passive beta drivers as pure plays on beta
  • Distinguish between ex ante and ex post alpha
  • Describe various types of beta nonstationarity (i.e., beta creep, beta expansion, and market timing) and their effects on return attribution
  • Discuss attribution of idiosyncratic returns to luck or skill
  • Demonstrate knowledge of statistical methods for locating alpha.
  • Demonstrate knowledge of sampling and testing problems.
  • Demonstrate knowledge of statistical issues in analyzing alpha and beta.
  • Discuss the characteristics of alpha drivers
  • Discuss how alpha and beta can become commingled
  • Discuss product innovators and process drivers
  • Identify the four steps of hypothesis testing (i.e., state the hypothesis, formulate an analysis plan, analyze sample data, and interpret results)
  • Recognize the components of hypothesis statements (i.e., null hypothesis and alternative hypothesis)
  • Describe the process of designing hypothesis tests
  • Describe the process of creating test statistics for use in analyzing sample data
  • Explain the decision-making process for rejecting or failing to reject the null hypothesis
  • Recognize the four common problems with using inferential statistics (i.e., misinterpretation of high p-values, failure to distinguish between statistical significance and economic significance, violation of distributional assumptions, and misinterpretation of level of confidence)
  • Define and discuss type I and type II errors in hypothesis testing
  • Recognize the characteristics of unrepresentative data sets (e.g., selection bias, self-selection bias, survivorship bias) and their effects on test results
  • Discuss data mining and data dredging, and recognize their effects on test results
  • Discuss backtesting and backfilling, and recognize their effects on test results
  • Discuss cherry-picking and chumming, and recognize their effects on test results
  • Recognize the effect of non-normality on the cross-sectional search for alpha
  • Identify the potential effects of outliers on reported results
  • Recognize issues involving biased testing in the search for alpha
  • Discuss the challenges of spurious correlation in beta estimation
  • Compare causality of values with true correlation of values
  • Recognize three major fallacies of alpha estimation and the lessons that arise from them
  • Recognize two major fallacies of beta estimation and the lessons that arise from them
Chapter 9 -  Regression, Multivariate, and Nonlinear Methods
  • Demonstrate knowledge of single-factor regression models.
  • Demonstrate knowledge of multifactor regression models.
  • Demonstrate knowledge of dynamic risk exposure models.
  • Demonstrate knowledge of methods for modeling changing correlation.
  • Demonstrate knowledge of approaches to analyzing hedge fund returns using multifactor models.
  • Demonstrate knowledge of estimating hedge fund performance persistence.
  • Discuss approaches to estimating hedge fund performance persistence
  • Recognize and describe the concept of conditional correlation
  • Describe the rolling window approach to modeling changing correlation
  • Describe the ex post version of the Fama-French model
  • Describe the problem that multicollinearity poses to multifactor regression analysis
  • Discuss the selection process of independent variables for multifactor regression analysis and the potential shortcomings to the stepwise regression technique
  • Describe how style analysis and asset class groupings can be used to analyze fund performance
  • Describe how performance of a fund can be analyzed using returns of funds with similar strategies
  • Describe how marketwide factors can be used to analyze performance of a fund
  • Describe how specialized market factors can be used in hedge fund replication
  • Define nonlinear exposure
  • Discuss and apply the dummy variable approach to analyzing market-timing strategies
  • Discuss the separate regression approach to analyzing market-timing strategies
  • Discuss and apply the quadratic approach to analyzing market-timing strategies
  • Explain the use of ordinary least squares to estimate regression parameters
  • Describe the problem outliers pose to regression analysis
  • Describe the problem autocorrelation poses to regression analysis
  • Describe the problem heteroskedasticity poses to regression analysis
  • Interpret a regression’s goodness of fit
  • Evaluate the statistical significance of regression parameter estimates
  • Calculate the t-statistic
Topic 3:  Real Assets moremore less 2 6.5 hours $109
Chapter 10 -  Natural Resources and Land
  • Demonstrate knowledge of natural resources other than land.
  • Demonstrate knowledge of land as an alternative asset.
  • Demonstrate knowledge of timber and timberland as alternative assets.
  • Demonstrate knowledge of farmland as an alternative asset.
  • Demonstrate knowledge of valuation and volatility of real assets.
  • Demonstrate knowledge of historical performance of timber and farmland.
  • Recognize inferences that can be drawn from comparing definable characteristics of timber and farmland investing with their historical stand-alone and portfolio performance
  • Discuss the smoothing of prices and returns
  • Determine the effect of smoothing on observed volatility
  • Describe how values and returns are managed
  • Discuss how appraisals contribute to smoothing of real asset prices
  • Compare smoothed returns with market returns
  • Discuss the characteristics of timber and timberland
  • Discuss the role of timberland investment management organizations (TIMOs)
  • Describe the risks and returns of timberland investments
  • Identify methods of timberland ownership
  • Discuss natural resources as an exchange option
  • Discuss the concept of moneyness as it pertains to the development of natural resources
  • Discuss why some in-the-money options should not be immediately exercised
  • Describe the relationship between the moneyness of natural resource options and short-term financial risks
  • Discuss the characteristics of farmland investments
  • Calculate the value of farmland based on annual operating income and the cap rate
  • Discuss financial analysis of farmland investments
  • Discuss factors that affect farmland prices and returns
  • Describe farmland as a multiple use option
  • Identify methods of obtaining exposure to farmland
  • Define land banking
  • Describe the three types of land lots (i.e., paper lots, blue top lots, and finished lots)
  • Discuss investment in undeveloped land as a call option
  • Apply the binomial option pricing technique for valuing land as a call option
  • Describe the risks and returns of investing in land
  • Calculate the expected return of land investments
Chapter 11 -  Commodity Forward Pricing
  • Demonstrate knowledge of forward and futures contracts.
  • Demonstrate knowledge of the rolling futures positions.
  • Demonstrate knowledge of the term structure of forward prices on commodities.
  • Demonstrate knowledge of the concepts of backwardation, normal backwardation, contango, and normal contango.
  • Demonstrate knowledge of the characteristics of returns on futures and forward contracts.
  • Discuss futures and forward contracts as alpha and beta drivers
  • Define the law of one price
  • Describe the relationship between ex ante alpha and the shape of the term structure of forward prices
  • Discuss informationally inefficient term structures of forward curves
  • Define and determine the basis of forward contracts
  • Describe calendar spreads, and discuss their risks and returns
  • Calculate returns to calendar spread positions
  • Define and compare backwardated markets and markets in contango
  • Discuss backwardation and contango in informationally efficient markets
  • Explain the process of maintaining long-term futures exposures through short-term futures positions
  • Discuss the effects of rollover decisions on the returns of long-term futures exposures
  • Define and compare normal backwardation and normal contango
  • Discuss normal backwardation and normal contango in informationally efficient and inefficient markets
  • Recognize the cost-of-carry model for commodity futures contracts
  • Calculate cost of carry for commodity futures contracts
  • Recognize arbitrage-free forward pricing for physical assets
  • Calculate arbitrage-free forward prices for physical assets
  • Recognize limitations to arbitrage-free forward pricing for physical assets
  • Discuss the effect of harvests, supply elasticity, and shifts in supply and demand on the term structure of forward prices
  • Describe the trading differences between forward and futures contracts
  • Describe and apply the marking-to-market process for futures positions
  • Discuss the effect of marking-to-market on counterparty risk
  • Recognize the effect of marking-to-market and the time value of money on risk and prices
  • Define and calculate initial margin for futures positions
  • Define and calculate maintenance margin for futures positions
Chapter 12 -  Commodities: Applications and Evidence
  • Demonstrate knowledge of the diversification benefits of commodities.
  • Demonstrate knowledge of commodities as potential return enhancers.
  • Demonstrate knowledge of investing in commodities without futures.
  • Demonstrate knowledge of commodity investment through futures contracts.
  • Demonstrate knowledge of commodity indices.
  • Demonstrate knowledge of risks associated with commodity investments.
  • Demonstrate knowledge of the return characteristics of commodity investments.
  • Recognize inferences that can be drawn from comparing definable characteristics of commodities with their historical investment performance
  • Discuss the process of construction of commodity futures indices
  • Discuss the characteristics of commodity indices given by S&P GSCI, BCOM, and CRB
  • Discuss the effect of event risk on returns from investments in commodities
  • Discuss the role of commodities as defensive investments
  • Discuss acceptance of commodity investments by institutional investors
  • Discuss potential return enhancement from idiosyncratic returns
  • Discuss potential return enhancement from systematic returns in efficient markets
  • Discuss potential return enhancement from systematic returns in inefficient markets
  • Discuss potential return enhancement from providing insurance through commodity futures
  • Explain the sources of potential diversification benefits offered by commodities
  • Discuss commodities in the context of equilibrium diversification
  • Discuss how market imperfections relate to determining allocations to commodities
  • Discuss commodities as a diversifier of inflation risk
  • Recognize characteristics of physical ownership of commodities
  • Recognize investments in commodities through related equity instruments
  • Recognize investments in commodities through exchange-traded funds (ETFs)
  • Recognize investments in commodities through commodity-linked notes
  • Apply option valuation methods to price commodity-linked notes
  • Recognize the basis risk and investments in commodities through futures contracts
  • Recognize the components of returns to futures positions (i.e., spot return, roll yield, collateral yield, and excess return)
  • Describe roll yield for financial and physical commodity futures
  • Describe the two interpretations of rolling contracts
  • Relate roll yield to the slope of the forward curve
  • Discuss convergence and the relationship between futures and spot prices through time
  • Calculate the aggregated profit or loss for a futures position
  • Recognize rollover strategies and their effect on returns from futures investments
  • Recognize the three propositions regarding roll return
Chapter 13 -  Operationally Intensive Real Assets
  • Demonstrate knowledge of commodity producers.
  • Demonstrate knowledge of liquid alternative real assets.
  • Demonstrate knowledge of infrastructure as an alternative asset.
  • Demonstrate knowledge of intellectual property as an alternative asset.
  • Discuss the structure of master limited partnerships (MLPs) and characteristics of the MLP sector
  • Identify the tax characteristics of MLPs
  • Discuss valuation of MLPs
  • Describe how commodity prices affect operating performance of firms that transform natural resources into commodities
  • Describe the relationship between commodity prices and equity prices of commodityproducing firms
  • Discuss intellectual property as an investment
  • Describe characteristics of intellectual property
  • Discuss the empirical evidence on the correlation between commodity prices and equity prices of commodity-producing firms
  • Recognize the factors that contribute to returns of film projects
  • Define and apply the simplified model for valuing intellectual property
  • Recognize the seven characteristics that distinguish investable infrastructure from other assets
  • Contrast economic and social infrastructure
  • Discuss the influence of government on infrastructure investments
  • Describe investment vehicles for investing in infrastructure
  • Discuss the risks and rewards of infrastructure investments
Chapter 14 -  Liquid and Fixed-Income Real Estate
  • Demonstrate knowledge of real estate as an investment.
  • Demonstrate knowledge of residential mortgages in the context of alternative investments.
  • Demonstrate knowledge of commercial mortgages in the context of alternative investments.
  • Demonstrate knowledge of mortgage-backed securities.
  • Demonstrate knowledge of real estate investment trusts (REITs).
  • Demonstrate knowledge of historical performance of mortgage REITs.
  • Recognize inferences that can be drawn from comparing definable characteristics of mortgage REITs with their historical stand-alone and portfolio performance
  • Describe characteristics of commercial mortgages
  • Identify, describe, and apply financial ratios (i.e., loan-to-value ratio, interest coverage ratio, debt service coverage ratio, and fixed charges ratio) employed in the analysis of commercial mortgages
  • Define a real estate investment trust (REIT)
  • List the key advantages of REITs
  • Discuss potential disadvantages of REITs as well as their main income restrictions
  • List five common attributes of real estate that encourage its inclusion in investment portfolios
  • Discuss heterogeneity, lumpiness, and illiquidity of real estate
  • Discuss and contrast core, value-added, and opportunistic real estate investment styles
  • Discuss residential mortgages and their prepayment options
  • Discuss and apply methods of measuring unscheduled prepayment rates
  • Describe and apply conditional prepayment rates (CPRs) and the resulting Public Securities Association (PSA) benchmark
  • List prepayment factors not associated with changing interest rates
  • Identify and describe commercial mortgage-backed securities, and compare and contrast them with residential mortgage-backed securities
  • Define mortgages, and differentiate between fixed- and variable-rate mortgages
  • Describe characteristics of fixed-rate mortgages, including amortization
  • Recognize the determinants of the monthly payment on a mortgage loan
  • Calculate monthly payments for fixed-rate and variable-rate mortgages
  • Calculate the outstanding mortgage balance
  • Describe the prepayment option embedded in fixed-rate mortgages
  • Describe characteristics of interest-only mortgages
  • Identify and apply the formula for valuation of interest-only mortgages
  • Describe characteristics of variable-rate mortgages
  • Identify and apply the formula for valuation of variable-rate mortgages
  • Describe other variations of mortgages
  • Calculate the monthly payments for a mortgage with a balloon payment
  • Describe default risk for residential mortgages
Chapter 15 -  Real Estate Equity Investments
  • Demonstrate knowledge of real estate development in the context of alternative investments.
  • Recognize inferences that can be drawn from comparing definable characteristics of equity REITs with their historical stand-alone and portfolio performance
  • Demonstrate knowledge of valuation and risks of real estate equity.
  • Demonstrate knowledge of alternative real estate investment vehicles.
  • Describe and apply various methods of depreciation of real estate (i.e., without income taxation, with depreciation disallowed for tax purposes, with economic depreciation allowed for tax purposes, with accelerated depreciation allowed for tax purposes, and with expensing of capital expenditures for tax purposes) in the analysis of returns
  • Demonstrate knowledge of depreciation of real estate.
  • Demonstrate knowledge of real estate equity risks and returns as represented by real estate indices.
  • Discuss real estate indices based on appraisals
  • Identify and describe data smoothing and its major effects
  • Demonstrate knowledge of historical performance of equity REITs.
  • Discuss real estate indices based on adjusted privately traded prices
  • Discuss real estate indices based on market prices
  • Recognize and apply the discounted cash flow approach (i.e., income approach) to valuing real estate, including the calculation of net operating income and the discount rate
  • Discuss the use of comparable sale prices for valuing real estate
  • Describe the processes of developing real estate
  • Describe the valuing of real estate development as a string of real options
  • Apply a decision tree and backward induction to value real estate development projects
  • Identify and describe private equity real estate funds
  • Identify and describe commingled real estate funds
  • Identify and describe syndications
  • Identify and describe joint ventures
  • Describe limited partnerships, and apply the concepts of gearing and loan-to-value (LTV) ratios
  • Identify and describe open-end real estate mutual funds
  • Discuss options and futures on real estate indices
  • Identify and describe exchange-traded funds based on real estate indices
  • Identify and describe closed-end real estate mutual funds
  • Discuss equity real estate investment trusts
Topic 4:  Hedge Funds moremore less 4 9.5 hours $149
Chapter 16 -  Structure of the Hedge Fund Industry
  • Demonstrate knowledge of the distinguishing features of hedge funds and their growth and concentration over time.
  • Identify and describe the three primary elements of hedge funds
  • Recognize typical hedge fund fee arrangements
  • Identify and describe equity strategies
  • List hedge fund strategies
  • Identify and explain the parameters that may be used in a hedge fund investment program
  • Describe hedge fund indices
  • Discuss the evidence regarding the market impact of hedge funds during the Asian currency crisis of 1997
  • Discuss the evidence regarding the market impact of hedge funds during the crisis of 2007
  • Describe the challenges caused by management and incentive fees in constructing hedge fund indices
  • Discuss three caveats that relate to the documented hedge fund investment performance and diversification benefits
  • Contrast single-manager hedge funds, funds of funds, and multistrategy funds
  • Identify and describe event-driven and relative value strategies
  • Calculate annual hedge fund fees
  • Recognize the six investment flexibilities offered by hedge funds
  • Demonstrate knowledge of hedge fund fees.
  • Demonstrate knowledge of various types of hedge funds.
  • Discuss the reasons for hedge fund industry growth and concentration
  • Describe and apply high-water marks (HWMs) and hurdle rates
  • Identify and describe absolute return strategies
  • Describe the characteristics and potential benefits of opportunistic hedge fund investing
  • Recognize the challenges of including managed futures in hedge fund indices
  • Compare asset-weighted hedge fund indices and equally weighted hedge fund indices
  • Identify and describe diversified strategies
  • Discuss the potential effects of incentive fees on hedge fund manager behavior
  • Recognize events that led to the trend of consolidation within the hedge fund industry
  • Demonstrate knowledge of various hedge fund strategies.
  • Demonstrate knowledge of hedge fund investment programs.
  • Recognize and apply the annuity view of hedge fund fees
  • Discuss the role of the size of the hedge fund universe in the construction of a hedge fund index
  • Recognize the concepts of representativeness and data biases (e.g., survivorship, selection, instant history, liquidation) and their effects on hedge fund returns reported by databases
  • Recognize and apply the option view of incentive fees and its implications on manager behavior
  • Demonstrate knowledge of the market impact of hedge funds.
  • Demonstrate knowledge of hedge fund indices.
  • Describe the empirical evidence regarding hedge fund fees and managerial behavior
  • Recognize the challenges involved in defining hedge fund strategies, and the effect of style drift
  • Identify issues that determine investability of hedge fund indices
Chapter 17 -  Macro and Managed Futures Funds
  • Demonstrate knowledge of major distinctions within the category of macro and managed futures funds.
  • Distinguish between discretionary fund trading and systematic fund trading
  • Describe the key characteristics of global macro funds
  • Recognize inferences that can be drawn from comparing definable characteristics of macro investing with its historical stand-alone and portfolio performance
  • Describe the key characteristics of managed futures funds
  • Describe the characteristics of trend-following strategies
  • Identify methods for and issues involved in deriving systematic trading rules
  • Discuss empirical evidence regarding managed futures returns and the downside risk protection offered by managed futures
  • Recognize inferences that can be drawn from comparing definable characteristics of managed futures and macro investing with their historical stand-alone and portfolio performance
  • Describe the reasons why managed futures might provide superior returns
  • Recognize key questions to ask when evaluating individual trading strategies
  • Define and apply simple moving averages, weighted moving averages, and exponential moving averages
  • Discuss regulation, background, and organizational structures (i.e., public commodity pools, private commodity pools, and individually managed accounts) of the managed futures industry
  • Be familiar with examples that illustrate the foundation of global macro trading strategies
  • Define technical analysis and fundamental analysis, and discuss the reasons for pursuing each
  • Demonstrate knowledge of global macro funds.
  • Demonstrate knowledge of the historical performance of macro investing.
  • Recognize the main risks (i.e., market, event, and leverage) of macro investing
  • Define and apply breakout trading rules
  • Describe key components of methods used to validate systematic trading rules and the detection and effects of trading rule degradation
  • Describe the risks of managed futures funds
  • List the conclusions of research on the nature and efficacy of trend-following strategies
  • Demonstrate knowledge of managed futures.
  • Demonstrate knowledge of systematic trading.
  • Identify non-trend-following strategies and their trading signals
  • Describe the characteristics of relative value strategies
  • Demonstrate knowledge of systematic trading strategies.
  • Demonstrate knowledge of empirical research on managed futures.
  • Demonstrate knowledge of historical performance of managed futures and macro funds.
Chapter 18 -  Event-Driven Hedge Funds
  • Demonstrate knowledge of the sources of event-driven strategy returns.
  • Define activist investing, and identify the components of activist investment strategies
  • Distinguish between distressed debt strategies in hedge funds and in private equity
  • Recognize the characteristics of merger arbitrage
  • Describe key characteristics of event-driven multistrategy funds
  • Explain the insurance selling view of event-driven strategy returns
  • Explain and apply the binary option view of event-driven strategy returns
  • Recognize inferences that can be drawn from comparing definable characteristics of eventdriven multistrategy funds with their historical stand-alone and portfolio performance
  • Recognize the characteristics of stock-for-stock mergers
  • Identify key components of the bankruptcy process
  • Identify the various roles in corporate governance
  • Demonstrate knowledge of activist investing.
  • Demonstrate knowledge of merger arbitrage.
  • Identify the five dimensions of shareholder activists and the key players in financial activism
  • Define a naked option position
  • Discuss and apply traditional merger arbitrage to stock-for-stock mergers
  • Discuss the effects of third-party bidders and bidding wars on merger arbitrage
  • Describe the risks and returns of short sales of distressed equities
  • Discuss agency costs and the conflicts of interest between shareholders and managers
  • Demonstrate knowledge of distressed securities hedge funds.
  • Demonstrate knowledge of event-driven multistrategy funds.
  • Recognize and discuss approaches commonly used by activist investors to generate alpha
  • Determine the effect of recovery values on annualized returns for a strategy of buying undervalued debt during the bankruptcy process
  • Describe regulatory risk in the context of merger arbitrage
  • Describe financing risk in the context of merger arbitrage
  • Recognize activist approaches to investing in distressed securities
  • Recognize inferences that can be drawn from three types of activist agendas, comparing definable characteristics of activist investing with its historical stand-alone and portfolio performance
  • Describe the characteristics of capital structure arbitrage
  • Recognize inferences that can be drawn from comparing definable characteristics of merger arbitrage with its historical stand-alone and portfolio performance
  • Explain the strategy of buying distressed firms using distressed securities
  • Recognize inferences that can be drawn from comparing definable characteristics of distressed securities funds with their historical stand-alone and portfolio performance
Chapter 19 -  Relative Value Hedge Funds
  • Demonstrate knowledge of relative value strategies.
  • Define and describe the classic convertible bond arbitrage trade
  • Recognize the relative value strategy, and list four styles of relative value hedge funds
  • Discuss duration neutrality, leverage, and liquidity in the context of fixed-income arbitrage
  • Define and describe the concepts of vega and anticipated volatility
  • Describe key characteristics of relative value multistrategy funds, and recognize inferences that can be drawn from comparing definable characteristics of relative value multistrategy funds with their historical stand-alone and portfolio performance
  • Recognize instruments used by volatility arbitrage funds
  • Recognize types and characteristics of fixed-income arbitrage strategies
  • Describe the classic relative value strategy trade
  • Define convertible bonds, and apply the unbundling approach for pricing convertible bonds
  • Demonstrate knowledge of convertible bond arbitrage.
  • Demonstrate knowledge of volatility arbitrage.
  • Define busted, hybrid, and equity-like convertibles
  • Discuss the risks and returns of sovereign debt in fixed-income arbitrage strategies, and apply the concept of modified duration to bond returns and volatility
  • Identify and apply the approach for determining the final payoff of a variance swap and a volatility swap
  • Compare the risks of exchange-traded derivatives and over-the-counter (OTC) derivatives
  • Recognize the characteristics of asset-backed and mortgage-backed securities strategies
  • Define, describe, and apply the concept of delta
  • Demonstrate knowledge of fixed-income arbitrage.
  • Demonstrate knowledge of relative value multistrategy funds.
  • Define and describe the concept of gamma and theta
  • Discuss and determine the effects of prepayment risk and option-adjusted spreads on assetbacked and mortgage-backed securities strategies
  • Recognize the types of volatility arbitrage strategies
  • Discuss the characteristics of market-neutral volatility funds
  • Analyze the risks of asset-backed and mortgage-backed securities arbitrage
  • Explain and determine the effects of gamma and volatility on the profitability of a deltaneutral position
  • Discuss short selling in the context of convertible arbitrage
  • Recognize inferences that can be drawn from comparing definable characteristics of fixedincome arbitrage with its historical stand-alone and portfolio performance
  • Recognize the challenges of estimating and forecasting dispersion
  • Discuss the characteristics of tail risk strategies and how their performance depends on correlation among assets
  • Recognize the role complexity plays in making convertible bond arbitrage attractive to some hedge fund managers
  • Identify the four reasons that issuers may continue to offer convertible bonds at attractive prices
  • Discuss the characteristics of dispersion trades
  • Recognize inferences that can be drawn from comparing definable characteristics of volatility arbitrage funds with their historical stand-alone and portfolio performance
  • Identify the components of convertible arbitrage returns
  • Recognize and discuss return drivers and risks of convertible bond arbitrage
  • Recognize inferences that can be drawn from comparing definable characteristics of convertible arbitrage funds with their historical stand-alone and portfolio performance
Chapter 20 -  Equity Hedge Funds
  • Demonstrate knowledge of sources of return for equity hedge funds.
  • Describe the general design of an equity hedge strategy
  • Discuss how market efficiency tests are tests of joint hypotheses
  • Calculate and interpret the key components (i.e., breadth and the information coefficient) of the FLOAM
  • Recognize methods for integrating anomalies using factor models
  • Recognize the mechanics of short selling
  • List major types of risk associated with equity hedge funds
  • Describe the key characteristics of short-bias hedge funds
  • Define pairs trading, and describe the steps involved in constructing the portfolio
  • Describe and determine how the FLOAM can be used to understand changes in the information ratio
  • Identify issues involved in predicting persistence of market anomalies
  • Discuss providing liquidity as a source of return for equity hedge funds
  • Demonstrate knowledge of market anomalies.
  • Demonstrate knowledge of the Fundamental Law of Active Management (FLOAM).
  • Discuss providing informational efficiency as a source of return for equity hedge funds
  • Describe and apply accounting accruals as potential predictors of ex ante alpha
  • Recognize trade-offs involved in changing or maintaining the information ratio
  • Discuss the effect of short selling on reducing risk and increasing alpha
  • Recognize inferences that can be drawn from comparing definable characteristics of shortbias hedge funds with their historical stand-alone and portfolio performance
  • Describe the key characteristics of equity long/short hedge funds
  • Describe the limits to arbitrage and their effect on market efficiency and investment strategies
  • Define nonactive bets, and recognize their role in the FLOAM
  • Define price momentum, and recognize its potential role in generating ex ante alpha
  • Discuss the process of using factor analysis to enhance returns for equity hedge funds
  • Demonstrate knowledge of approaches to implementing anomaly strategies.
  • Demonstrate knowledge of the three major strategies of equity hedge funds.
  • Define earnings momentum, and recognize its potential role in generating ex ante alpha
  • Recognize inferences that can be drawn from comparing definable characteristics of equity long/short hedge funds with their historical stand-alone and portfolio performance
  • Describe the key characteristics of equity market-neutral hedge funds
  • Define net stock issuance, and recognize its potential role in generating ex ante alpha
  • Demonstrate knowledge of risk associated with equity hedge funds.
  • Define insider trading, and recognize its potential role in generating ex ante alpha
  • Recognize inferences that can be drawn from comparing definable characteristics of equity market-neutral hedge funds with their historical stand-alone and portfolio performance
Chapter 21 -  Funds of Hedge Funds
  • Define funds of hedge funds
  • Demonstrate knowledge of the benefits and costs of diversification in hedge fund investing.
  • Identify advantages that funds of funds have over direct hedge fund investments
  • Evaluate and determine fee-related advantages of multistrategy funds
  • Contrast the fees associated with a fund of funds with those of a portfolio of single hedge funds
  • Contrast liquid alternatives with a private alternative investment vehicle, such as hedge funds, CTAs, and funds of funds
  • Recognize inferences that can be drawn from comparing definable characteristics of marketdefensive funds of funds with their historical stand-alone and portfolio performance
  • Recognize inferences that can be drawn from comparing definable characteristics of conservative funds of funds with their historical stand-alone and portfolio performance
  • Discuss areas where UCITS regulation is more strict than that for private placements
  • Discuss costs associated with hedge fund due diligence and minimum investment sizes
  • Evaluate flexibility and transparency in the context of multistrategy funds
  • Discuss empirical evidence regarding fund of funds returns and the potential for reduced biases in reported performance
  • Demonstrate knowledge of investing in multistrategy funds.
  • Recognize how indices can serve as valuable tools in constructing hedge fund portfolios and analyzing portfolio performance
  • Describe the functions of funds of hedge funds
  • Demonstrate knowledge of the process of investing in funds of hedge funds.
  • Recognize the varying investment objectives of funds of hedge funds
  • Evaluate potential advantages related to manager selection and operational risk management by funds of funds
  • Discuss restrictions on ’40 Act funds
  • Recognize inferences that can be drawn from comparing definable characteristics of strategic funds of funds with their historical stand-alone and portfolio performance
  • Recognize inferences that can be drawn from comparing definable characteristics of diversified funds of funds with their historical stand-alone and portfolio performance
  • Compare and contrast relative value hedge funds, event-driven hedge funds, and macro and managed futures funds in the context of the regulatory framework for liquid alternative investments
  • Describe how funds of funds can act as venture capitalists
  • Demonstrate knowledge of building a portfolio of single hedge funds.
  • List the benefits to investing in funds of hedge funds
  • List the disadvantages to investing in funds of hedge funds
  • Demonstrate knowledge of multialternatives and other hedge fund liquid alternatives.
  • Discuss why multialternatives are popular as liquid alternatives
  • Discuss empirical evidence regarding historical returns of liquid alternatives
  • Demonstrate knowledge of historical performance of funds of hedge funds.
  • Evaluate how funds of hedge funds add value
  • Discuss and determine the relationship between the number of funds in a portfolio and the level of diversification
  • Describe the process for identifying funds for an institutional portfolio or a fund of funds
Topic 5:  Private Equity moremore less 1 1.5 hours $49
Chapter 22 -  Introduction to Private Equity
  • Demonstrate knowledge of private equity terminology.
  • Recognize characteristics of venture capital and its role in business start-ups
  • Describe mezzanine debt, and explain why it is considered a type of private equity investment
  • Discuss secondary markets in the context of private equity
  • Describe business development companies (BDCs)
  • Recognize the structure of private equity funds and investments
  • Explain the roles of various entities involved in private equity investments
  • Calculate the premium (or discount) of closed-end fund prices
  • Describe private investment in public equity (PIPE), and compare it to other private equity investments
  • Discuss distressed debt securities in the context of private equity investing
  • Discuss the prudent person standard in the context of venture capital
  • Demonstrate knowledge of the major forms of private equity investments that involve direct ownership of equity claims.
  • Demonstrate knowledge of the major forms of private equity that involve direct ownership of debt securities.
  • Recognize characteristics of buyouts and the role of debt in these transactions
  • Discuss the growth of the distressed debt marketplace
  • Recognize advantages that PIPEs offer investors
  • Recognize the effect of illiquidity on closed-end fund pricing
  • Discuss the diversification and return-enhancement potential of liquid private equity pools
  • Recognize and compare various types of PIPEs
  • Explain various types of debt covenants
  • Recognize characteristics of merchant banking and the benefits it offers financial institutions
  • Demonstrate knowledge of liquid alternatives in the private equity sector.
  • Demonstrate knowledge of trends and innovations in private equity markets.
  • Discuss leveraged loans in the context of private equity investing
  • Discuss hedge fund participation in private equity
  • Discuss other liquid investments in private equity
  • Contrast private equity funds and hedge funds
  • Discuss the growth of leveraged loans
Chapter 23 -  Equity Types of Private Equity
  • Demonstrate knowledge of the relationships between venture capital and leveraged buyouts.
  • Recognize the role of venture capital and leveraged buyouts as sources of funding for corporations through their life cycle
  • Recognize characteristics of businesses underlying venture capital investment
  • Describe the main risks of venture capital investments (i.e., business risk, liquidity risk, and idiosyncratic risk)
  • Define a venture capital fund
  • Describe the stages of the life cycle of venture capital funds and portfolio companies
  • Describe the structure of LBO funds and the role of various entities involved in LBO transactions
  • Distinguish leveraged buyouts (LBOs) from traditional investments
  • Describe a management buyout (MBO)
  • Describe typical LBO fund fee structures
  • Explain the importance of financing stages in distinguishing among various venture capital funds
  • Recognize how venture capital fund managers raise capital
  • Describe return persistence and vintage-year diversification as keys to successful venture capital investment
  • List the types of securities used in venture capital
  • Demonstrate knowledge of the underlying businesses (portfolio companies) of venture capital.
  • Demonstrate knowledge of venture capital funds.
  • Explain why venture capital investing is similar to purchasing a call option
  • Recognize inferences that can be drawn from comparing definable characteristics of venture capital investments with their historical stand-alone and portfolio performances
  • Recognize the terms of the partnership agreement of venture capital funds
  • Explain the compound option that is embedded in most venture capital investments
  • Calculate LBO fees
  • Contrast a management buy-in (MBI) with a buy-in management buyout, and describe the agency issues of buyouts
  • Describe agency relationships, their associated costs, and their role as a potential source of return to LBO transactions
  • Discuss the concept of the J-curve in the context of a start-up company
  • Describe typical venture capital fund fee structures
  • Describe the role of business plans and exit plans in venture capital investment
  • Demonstrate knowledge of the dynamics of investing in venture capital.
  • Demonstrate knowledge of the risk and return characteristics of venture capital investments.
  • Calculate venture capital fund fees
  • Describe general categories of LBO transactions and how they create value
  • Discuss the characteristics of portfolio companies of LBO funds
  • Demonstrate knowledge of types of buyout transactions.
  • Demonstrate knowledge of leveraged buyout (LBO) transactions.
  • Explain the appeal of a leveraged buyout to managers and investors of the target firm
  • Describe the call-option characteristics embedded in potential payouts of a leveraged buyout
  • Apply the constant growth model to the valuation of a leveraged buyout investment
  • Describe typical exit strategies of LBOs
  • Describe the concept of spillover of corporate governance to the public markets
  • Explain auction markets and club deals as alternatives to the single-sourced approach to funding LBO transactions
  • Discuss why LBO funds tend to have less risk than venture capital funds
Chapter 24 -  Debt Types of Private Equity
  • Demonstrate knowledge of mezzanine debt.
  • Describe characteristics of mezzanine debt, including typical exit strategies
  • Recognize characteristics of distressed debt
  • Discuss the supply of distressed debt
  • Analyze how mezzanine debt affects company cost of capital
  • Demonstrate knowledge of distressed debt as a form of private equity investment.
  • Calculate the weighted average cost of capital of capital structures that include mezzanine debt
  • Discuss the demand for distressed debt
  • Describe the three typical approaches to distressed debt investment
  • Compare and contrast mezzanine debt to leveraged loans and high-yield bonds
  • Describe seven typical examples of transactions that use mezzanine debt
  • Describe two major types of corporate bankruptcy processes
  • Identify the various terms and standards that relate to bankruptcy processes
  • Describe types of mezzanine debt investors, and recognize their motivations
  • Identify and describe eight characteristics that distinguish mezzanine debt from other types of financing
  • Discuss business risk in the context of distressed debt investing
Topic 6:  Structured Products moremore less 2 3 hours $69
Chapter 25 -  Introduction to Structuring
  • Demonstrate knowledge of financial structuring.
  • Discuss the relationship between financial structuring and the capital structure of the corporate form of a business organization
  • Describe the capital structure of a typical business enterprise
  • State the primary direct motivation of the issuer
  • Describe the primary difference between CMOs and other investment pools
  • Recognize the optionlike nature of structured cash flows
  • Define and explain various tranches of a CDO
  • Discuss attachment points and detachment points
  • Recognize the intuition of Merton’s structural model
  • Describe sequential-pay CMOs
  • Discuss how market completion is a motivation for structuring
  • Explain how structured products can be used to design a hedge
  • Demonstrate knowledge of the major types of structuring.
  • Demonstrate knowledge of the primary economic role of structuring.
  • Explain the idea behind tranches
  • Define state of the world
  • Calculate cash flows to the tranches of a sequential-pay CMO
  • Apply the call-option and put-option views of capital structure
  • Calculate cash flows to different tranches of a CDO in the case of defaults of the underlying instruments
  • Define a bull call spread and a bull put spread
  • Discuss the inherent conflict of interest between stockholders and bondholders
  • Define extension and contraction risk
  • Discuss how structured products are market completers
  • Discuss two examples of tailoring structured products
  • Demonstrate knowledge of collateralized mortgage obligations (CMOs).
  • Demonstrate knowledge of the structural approach to credit risk modeling.
  • Identify and describe other types of CMO structures and tranches (i.e., planned amortization class, targeted amortization class, principal-only, and floating rate)
  • Define and apply put-call parity
  • Explain the relationship between option spreads, mezzanine tranches, and other tranches
  • Describe how the Black-Scholes option pricing model can be used to estimate the value of debt that contains credit risk
  • List the two motivations for structured mortgage products
  • Demonstrate knowledge of the concept of structuring cash flows using collateralized debt obligations (CDO).
  • Discuss how interest rates and prepayments impact the valuation of a CMO
  • Discuss binomial tree models as an alternative to the Black-Scholes option pricing model
  • Discuss advantages and disadvantages of structural credit risk models
  • Discuss the role of CMOs in the financial crises of 1994 and 2004
  • Describe commercial CMOs and their default risk
Chapter 26 -  Credit Risk and Credit Derivatives
  • Demonstrate knowledge of credit risk.
  • List and discuss the three economic roles of credit derivatives
  • Compare and contrast credit default swaps and total return swaps
  • Explain the underpinnings of credit risk
  • Identify the difference between structural models and reduced-form models
  • Describe credit default swap index products
  • Discuss the risks of excessive credit exposure using off-balance-sheet derivatives, pricing risk of over-the-counter derivatives, and liquidity risk of over-the-counter derivatives
  • Contrast credit default swaps and credit options
  • Recognize the terminology of credit options
  • Discuss the counterparty risk of over-the-counter credit default swaps and the basis risk of credit default swaps
  • Define the three factors that determine the expected credit loss of a credit exposure
  • Discuss the standard ISDA agreement as a template for negotiated credit agreements
  • Recognize the three major methods for grouping credit derivatives
  • Demonstrate knowledge of approaches to credit risk modeling.
  • Demonstrate knowledge of credit derivatives markets.
  • Describe the four stages of the evolution of credit derivative activity
  • Explain and apply the mechanics of credit default swaps
  • Calculate expected credit loss
  • Explain the credit put option on a bond
  • Explain call options on credit default swaps
  • Describe two key characteristics of the risk-neutral modeling approach
  • Explain the mark-to-market adjustment when valuing credit default swap contracts
  • Demonstrate knowledge of credit default swaps.
  • Demonstrate knowledge of credit options and credit-linked notes.
  • Explain three methods for unwinding credit default swap transactions
  • Define risk-neutral probability
  • Describe credit-linked notes
  • Describe and apply the risk-neutral approach to pricing risky debt
  • Recognize typical credit default swap market participants and their swap transactions
  • Demonstrate knowledge of credit default swap indices.
  • Demonstrate knowledge of the five key risks of credit derivatives.
  • Identify and explain five typical motivations for using credit default swaps
  • Apply the risk-neutral approach to estimating credit spreads
  • Explain what it means to calibrate a model
  • List the advantages and disadvantages of the reduced-form model
  • Compare structural and reduced-form credit risk models
Chapter 27 -  CDO Structuring of Credit Risk
  • Discuss the purposes and attributes of balance sheet CDOs
  • Demonstrate knowledge of collateralized debt obligations (CDOs).
  • Identify the three direct financial motivations for a manager of an arbitrage CDO
  • Compare and contrast cash-funded CDOs and synthetic CDOs
  • Describe the history of CDOs
  • Describe the characteristics of cash flow CDOs
  • Recognize the risk of the underlying collateral
  • Define and discuss subordination as an internal credit enhancement
  • Describe distressed debt CDOs
  • Describe hedge fund CDOs
  • Discuss and apply overcollateralization
  • Recognize the financial engineering risk
  • Describe the characteristics of market value CDOs
  • Describe the general structure and life cycle of a CDO
  • Explain how a cash-funded CDO can be used to reduce required regulatory capital
  • Demonstrate knowledge of balance sheet CDOs and arbitrage CDOs.
  • Discuss the purposes and attributes of arbitrage CDOs
  • Describe and apply a typical arbitrage CDO structure
  • Demonstrate knowledge of the mechanics of and motivations for arbitrage CDOs.
  • Apply a typical cash-funded CDO structure
  • Explain the terminology and details of CDOs
  • Discuss the implications of high correlations among the underlying assets
  • Describe excess spread as an internal credit enhancement
  • Describe single-tranche CDOs
  • Discuss reserve accounts as a credit enhancement
  • Define risk shifting, and discuss its implications for CDOs
  • Describe the characteristics of synthetic CDOs
  • Demonstrate knowledge of cash-funded CDOs and synthetic CDOs.
  • Analyze the cash flows in a typical arbitrage CDO structure
  • Demonstrate knowledge of cash flow and market value CDOs.
  • Describe how CDO credit risk can be modeled
  • Describe external credit enhancements to CDOs
  • Demonstrate knowledge of credit risk and enhancement of CDOs
  • Demonstrate knowledge of new developments in CDOs.
  • Demonstrate knowledge of the risks of CDOs.
Chapter 28 -  Equity-Linked Structured Products
  • Describe equity-linked structured products
  • Compare and contrast simple options and exotic options
  • Demonstrate knowledge of structured products and types of wrappers.
  • Describe the tax effects of wrappers
  • Discuss the example of a U.S.-based structured product with multiple kinks
  • Identify the PDE approach to the pricing of structured products
  • Identify investor motivations for including structured products in a portfolio
  • Discuss tax-related motivations for investors
  • Discuss the advantages of the simulation approach over the PDE approach
  • Discuss the example of a France-based structured product with floors
  • Apply the equations in the chapter to demonstrate the tax effects of wrappers
  • Demonstrate knowledge of potential tax effects of wrappers.
  • Explain principal protected structured products
  • List distinguishing features of equity-linked structured products
  • Define a wrapper
  • Define the participation rate
  • Demonstrate knowledge of structured products with exotic option features.
  • Discuss the example of a German-based structured product with leverage
  • Contrast the PDE approach and the building blocks approach
  • Discuss the motivations of issuers of structured products
  • Explain the two principles of payoff diagram shapes and levels
  • Discuss the example of a U.K.-based absolute return structured product
  • Demonstrate knowledge of examples of global structured products.
  • Illustrate how a cash-and-call strategy is related to put-call parity
  • Describe the six types of wrappers
  • Identify path-dependent options and binary options
  • Demonstrate knowledge of structured product pricing.
  • Discuss the example of a Swiss-based absolute return structured product
  • Discuss the evidence on structured product prices
  • Discuss the example of a Japan-based structured product based on multiple currencies
  • Demonstrate knowledge of motivations of structured products.
  • Describe and apply barrier, knock-in, and active options
  • Describe the characteristics of in versus out and up versus down barrier options
  • Explain the advantages and disadvantages of liquid structured products
  • Define spread options and look-back options
  • Define a quanto option
Topic 7:  Risk Management and Portfolio Management moremore less 1 2 hours $49
Chapter 29 -  Cases in Tail Events
  • Demonstrate knowledge of the effect of market forces in generating hedge fund losses..
  • Discuss the collapse of Amaranth Advisors, LLC; the due diligence issues related to it; and lessons learned from the case
  • Discuss how the unwind hypothesis and crowded trades explain the Quant Meltdown of August 2007.
  • Discuss the case of Bayou Management, the due diligence issues related to it, and lessons learned from it
  • Discuss the lessons that emerge from the analysis of various types of hedge fund failures
  • Discuss the case of Bernie Madoff, the due diligence issues related to it, and lessons learned from it
  • Discuss how a circuit breaker can help prevent a flash crash.
  • Discuss the collapse of Long-Term Capital Management (LTCM), the due diligence issues related to it, and lessons learned from the case
  • Demonstrate knowledge of the impact of trading technologies in financial crises.
  • Demonstrate knowledge of major fund failures caused by fraud.
  • Discuss the collapse of Carlyle Capital Corporation, the due diligence issues related to it, and lessons learned from the case
  • Discuss how technical issues at one large market participant can impact the financial markets
  • Discuss the case of Lancer Group, the due diligence issues related to it, and lessons learned from it
  • Discuss the link between declining investment opportunities and use of leverage
  • Demonstrate knowledge of four major lessons from analysis of fund failures.
  • Apply the concepts of return on equity, return on assets, and leverage to evaluate levered investment situations
  • Identify and describe behavioral biases and their potential effects on risk taking
Chapter 30 -  Investment Process, Operations, and Risk
  • Demonstrate knowledge of investment strategy and process.
  • Contrast the general and narrower definitions of market risk
  • Define investment activities
  • Discuss the two interpretations of operational risk
  • Describe how put-call parity can be applied to hedge a position
  • Explain how incentives can increase operational risk
  • Contrast a fund’s stated investment strategy and actual investment strategy
  • Contrast style drift with operational errors and fraud
  • Discuss how internal control procedures can detect and reduce operational risk
  • Discuss how option sensitivities can be used to analyze and hedge a position or portfolio
  • Identify and describe operational errors
  • Define operational activities
  • Discuss the causes of investment process risk and how it’s detected
  • Demonstrate knowledge of investment process and market risk.
  • Demonstrate knowledge of the three internal fund activities.
  • Describe the relationship between investment process risk and leverage
  • Define business activities
  • Identify and describe types of agency conflicts
  • Discuss how options can be used as a bet on volatility
  • Explain the importance of valuation procedures and independence in the valuation process
  • Describe the components and stages of the investment process
  • Define custody, and explain how it relates to operational risk
  • Identify and describe operational fraud
  • Discuss how these three internal fund activities impact a fund in combination
  • Describe how style drift relates to investment process risk
  • Demonstrate knowledge of operational risk.
  • Demonstrate knowledge of methods for controlling the operational risk of an investment.
  • Discuss potential interactions of market risk with other investment risks
  • Identify and describe the concept of fund culture and how it affects operational risk
  • Demonstrate knowledge of methods for controlling the risk of portfolios with options.
Chapter 31 -  Due Diligence of Fund Managers
  • Identify evidence for and organization of a due diligence process
  • Define and describe due diligence processes related to investigation of investment objectives of hedge funds
  • Describe the main issues related to the review of a fund’s organization
  • Explain the importance of understanding the markets and securities in which a manager invests
  • Demonstrate knowledge of due diligence evidence and organization.
  • Identify and discuss three important risk management questions
  • Discuss considerations in the review of the fund structure
  • Discuss the importance of due diligence on the ethical and legal history of fund employees
  • Describe the behavioral biases that can interfere with performance analysis
  • Discuss the role of the omega score in measuring operational risk
  • Discuss the process of conducting reference checks on service providers
  • Identify key questions to ask when conducting reference checks on other investors
  • Discuss the cost of fund manager due diligence
  • Identify and discuss three important questions to ask regarding all assets controlled by the fund manager
  • Discuss the reasons for review of employee turnover
  • Discuss considerations in the review of the fund fees
  • Describe and apply the role of leverage in determining the total risk of a fund
  • Demonstrate knowledge of the three questions critical to understanding the nature of a manager’s investment program.
  • Discuss the issues related to benchmarking of fund returns
  • Discuss the master trust account structure, and recognize its uses by hedge funds
  • Define and describe due diligence processes related to investigation of investment processes of hedge funds
  • Define and describe due diligence processes related to investigation of how hedge fund managers add value
  • Explain the importance of reviewing fund managers’ organizational structures
  • Describe key considerations in the analysis of managers’ competitive advantages and sources of investment ideas
  • Demonstrate knowledge of the due diligence of hedge fund structures.
  • Discuss the role of the chief risk officer (CRO)
  • Discuss considerations in the review of the lockup and redemption provisions, including gates and hard and soft lockup periods
  • Discuss the ideal organization of investor relations
  • Discuss the analysis of drawdowns
  • Identify and discuss the five issues related to the use of past data to predict future performance
  • Describe the importance of business continuity management
  • Discuss considerations in the review of the subscription amount
  • Demonstrate knowledge of the strategic review of fund managers in the due diligence process.
  • Describe key considerations in the review of managers’ current portfolio positions
  • Discuss separation of duties and how organizational charts can be used to evaluate it
  • Describe and contrast information gathering and information filtering
  • Recognize the importance of reviewing and documenting regulatory registrations
  • Describe key considerations in the review of the source of investment ideas
  • Demonstrate knowledge of the administrative review of funds.
  • Discuss the role of the advisory committee
  • Describe how the analysis of returns can be impacted by the investment horizon
  • Discuss issues related to subscriptions, redemptions, and volatility of assets under management
  • Demonstrate knowledge of the procedure for conducting a performance review of a fund manager in the due diligence process.
  • Discuss investment strategy capacity in the context of evaluating structural risk
  • Describe evaluation and documentation of outside service providers, including the auditor, attorneys, and the prime broker
  • Demonstrate knowledge of the procedure for conducting a portfolio risk review of a fund manager in the due diligence process.
  • Describe considerations in the review of the asset manager’s process for pricing securities in a portfolio
  • Demonstrate knowledge of the procedure for conducting a legal review of a fund manager in the due diligence process.
  • Demonstrate knowledge of the procedure for conducting reference checks on service providers and other fund investors.
  • Demonstrate knowledge of the procedure for measuring operational risk.
Chapter 32 -  Portfolio Management, Alpha, and Beta
  • Demonstrate knowledge of smart beta strategies.
  • Recognize the distinguishing characteristics of smart beta strategies from active alpha-based strategies
  • Discuss the challenges of estimating alpha and beta
  • Describe the concept of the separation of alpha and beta
  • Demonstrate how to transfer risk with appropriately sized positions in derivatives
  • Describe the process of traditional asset allocation
  • Explain strategic and tactical asset allocation
  • Apply the concept of notional value to determine futures positions designed to transfer risk
  • Describe the objectives of smart beta strategies
  • Demonstrate knowledge of factors involved in the estimation of alpha and beta.
  • Demonstrate knowledge of the concept of separating alpha and beta.
  • Discuss how smart beta strategies can be used in portfolio management
  • Discuss the application of portable alpha using futures contracts
  • Describe the new investment model
  • Discuss active risk and active returns for traditional investment products
  • Apply the concept of portable alpha to portfolio management
  • Demonstrate knowledge of portable alpha.
  • Demonstrate knowledge of asset allocation using the concepts of alpha and beta.
  • Discuss challenges with porting alpha
  • Evaluate the proposition that alpha is a zero-sum game

Check out details of our courses below.

Online Courses Instructors System Requirements  

Both course options provide unlimited access to recordings of course sessions from any computer and tablet/iPad until the end of the current CAIA exam period.

  • Complete Course - perfect for professionals who want both flexibility and structure in their study programs. Set your personal study schedule and then work through the curriculum with the instructor-guided program.
  • Course by Topic - perfect for candidates who prefer a self-study approach, but want guidance on specific Topics.

UpperMark courses explain and summarize CAIA exam material, carefully demonstrate calculations, and provide personal guidance for success on the exam. Other essential components of our courses -

  • Thorough instruction of the CAIA exam material.
  • Clear explanations of concepts and formulas.
  • Step-by-step presentations of calculations.
  • Personal guidance from UpperMark's experienced faculty.
  • Exclusive lecture notes for each course session - print lecture notes and annotate them while watching the course. Our lecture notes are an excellent summary of the CAIA material - an ideal study resource.

Complete Course attendees also have access to valuable office hours and recordings of office-hour sessions.

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DETAILS
  • Course: Complete Set (Topics 1-7)
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  • Course: Topic 3
  • Course: Topic 4
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