CAIA - 23 - Allocation to Commodities Flashcards Preview

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Flashcards in CAIA - 23 - Allocation to Commodities Deck (59)
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1

The risk of commodity futures positions can be reduced significantly by fully ___ the positions.

The risk of commodity futures positions can be reduced significantly by fully collateralizing the positions.

2

The correlation of commodities to a traditional stock/bond portfolio ___ as time increases.

The correlation of commodities to a traditional stock/bond portfolio decreases as time increases.

3

In recent years, correlations of commodities to stocks/bonds has ___ due to ___.

In recent years, correlations of commodities to stocks/bonds has increased due to financialization.

4

Returns for spot contracts are ___ than for futures contracts.

Returns for spot contracts are lower than for futures contracts.

5

Commodities are ___ diversifiers than most institutional real estate.

Commodities are better diversifiers than most institutional real estate.

6

Commodity futures have the added benefit of ___ that many alternative investments lack.

Commodity futures have the added benefit of liquidity that many alternative investments lack.

7

Agricultural commodities are affected (a lot/very little) by the business cycle.

Agricultural commodities are affected very little by the business cycle.

8

Industrial commodities are affected (a lot/very little) by the business cycle.

Industrial commodities are affected a lot by the business cycle.

9

Compared to stock and bond returns, commodity returns are (more/less) predictable in the stages of the business cycle.

Compared to stock and bond returns, commodity returns are more predictable in the stages of the business cycle.

10

In late expansion and early recession phases, commodities typically ___ stocks and bonds.

In late expansion and early recession phases, commodities typically outperform stocks and bonds.

11

In late recession or early expansion phases, commodities typically ___ stocks and bonds.

In late recession or early expansion phases, commodities typically underperform stocks and bonds.

12

Active strategies can be implemented to exploit the different performances of the business cycle:

 

1. Late expansion: long ___ and short ___

2. Early recession: long ___and short ___

3. Late recession: long ___and short ___

4. Early expansion: long ___and short ___

Active strategies can be implemented to exploit the different performances of the business cycle:

 

1. Late expansion: long commodities and short bonds

2. Early recession: long commodities and short stocks

3. Late recession: long bonds and short commodities

4. Early expansion: long stocks and short commodities

13

Commodity prices are typically ___ affected by events such as natural disasters, political unrest, and economic stress.

Commodity prices are typically positively affected by events such as natural disasters, political unrest, and economic stress.

14

___ ___is the enhanced average or expected geometric mean return that results from rebalancing a portfolio.

Diversification return is the enhanced average or expected geometric mean return that results from rebalancing a portfolio.

15

Long positions should only be taken in commodities that exhibit ___ or have ___inventory levels.

Long positions should only be taken in commodities that exhibit backwardation or have low inventory levels.

16

Commodity prices have ___ skewed returns.

Commodity prices have positively skewed returns.

17

Commodities have ___ kurtosis

Commodities have higher kurtosis

18

Commodity trading strategies are either ___ strategies or ___ ___ strategies.

Commodity trading strategies are either directional strategies or relative value strategies.

19

___ strategies take positions exposed to systematic risk based on forecasts of market direction.

Directional strategies take positions exposed to systematic risk based on forecasts of market direction.

20

___ ___strategies aim to identify and trade mispriced assets and to hedge away some or all market exposure.

Relative value strategies aim to identify and trade mispriced assets and to hedge away some or all market exposure.

21

Directional strategies typically use listed or OTC ___.

Directional strategies typically use listed or OTC derivatives.

22

Directional strategies can either be ___ or ___.

Directional strategies can either be fundamental or quantitative.

23

___ ___strategies make allocations based on analysis of supply-demand factors and are typically based on macroeconomic or industry-specific factors.

Fundamental directional strategies make allocations based on analysis of supply-demand factors and are typically based on macroeconomic or industry-specific factors.

24

___ ___strategies use technical or quantitative models to identify over and underpriced commodities based on projected spot prices or mispriced futures term structures.

Quantitative directional strategies use technical or quantitative models to identify over and underpriced commodities based on projected spot prices or mispriced futures term structures.

25

A ___ ___strategy is a long/short strategy that estimates the potential returns using the price difference between front and second nearest future contracts.

roll return strategy is a long/short strategy that estimates the potential returns using the price difference between front and second nearest future contracts.

26

Estimating potential risk premium embedded in futures prices is ___ difficult than estimating roll yield.

Estimating potential risk premium embedded in futures prices is more difficult than estimating roll yield.

27

Relative value strategies can be implemented across ___, ___or ___.

Relative value strategies can be implemented across timecorrelation or location.

28

___ ___are strategies that exploit trading opportunities based on relative commodity prices that can be executed in derivatives markets.

Commodity spreads are strategies that exploit trading opportunities based on relative commodity prices that can be executed in derivatives markets.

29

A ___ spread takes long and short positions in futures contracts with different delivery dates.

calendar spread takes long and short positions in futures contracts with different delivery dates.

30

Calendar spreads provide ___, ___, or ___ a ___.

Calendar spreads provide insuranceliquidity, or express a view.

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