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CFA Level2 Vocab

Subjects : certifications, cfa
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The positive square root of the variance; a measure of dispersion in the same units as the original data.






2. Aka marking to market.






3. Huidity When receipts lag - creating pres-sure fmm the decreased available funds.






4. Options that are far out-of-the-money.






5. Mean active return divided by active risk; or alpha divided by the standarddeviation of diversifiable risk.






6. The residuals from a fitted time-series model within the sample period used to fit the model.






7. An option in which the underlying value equals the exercise price.






8. Short-term obligations - such as accounts payable - wages payable - or accrued liabil-ities - that are expected to be settled in the near future - typically one year or less.






9. Estimate of the aver-age number of days it takes to collect on credit accounts.






10. The portion of the minimum-variance frontier beginning with the global mmlmum-variance portfolio and continuing above it; the graph of the set of portfolios offering the maximum expected return for their level of variance of return.






11. Any outcome or specified set of outcomes of a random variable.






12. The standard deviation of the differ-ence in returns between an active investment portfolio and its benchmark portfolio; also called tracking error volatility - tracking risk - and active risk.






13. The price of a security with accrued interest.






14. A measure of sensitivity; the incremental change in one variable with respect to an incre-mental change in another variable.






15. The accuracy with which a company's reported financials reflect its operat-ing performance and their usefulness for forecast-ing future cash flows.






16. Describes a scale constructed so that equal intervals on the vertical scale represent equal rates of change - and equal intervals on the horizontal scale represent equal amounts of change.






17. The difference between the fixed rate on an interest rate swap and the rate on a Trea-sury note with equivalent maturity; it reflects the general level of credit risk in the market.






18. Aka also enterprise risk management.






19. A multifactor model in which the factors are attributes of stocks or com-panies that are important in explaining cross-sectional differences in stock prices.






20. The expected excess return on the market over the risk-free rate.






21. The amount at which an asset or liability is valued according to account-ing principles.






22. Quantiles that divide a distribution into 10 equal parts.






23. A method for determining the required rate of return on equity as the sum ofrisk premiums - in which one or more of the risk premiums is typically subjective rather than grounded in a formal equilibrium model.






24. Attempts by management to encourage analysts to forecast a slightly lower number for expected earnings than the analysts would otherwise forecast.






25. The perceived ability of the bor-rower to pay what is owed on the borrowing in a timely manner; it represents the ability of a com-pany to withstand adverse impacts on its cash flows.






26. A measurement scale that not only ranks data but also gives assurance that the differ-ences between scale values are equal.






27. The value of a company if the com-pany were dissolved and its assets sold individually.






28. An option strategy that is equiva-lent to a short butterfly spread.






29. A series of call options on an interest rate - with each option expiring at the date on which the floating loan rate will be reset - and with each option having the same exercise rate. A cap in general can have an underlying other than an interest ra






30. A minimum level of cash to be held available-estimated in advance and adjusted for known funds transfers - seasonality - or other factors.






31. Describes a time series whenits expected value and variance are cons tan t andfinite in all periods and when its covariance withitself for a fixed number of periods in the past orfuture is constant and finite in all periods.






32. Asset allocation in which the invest-ment in the market is increased if one forecasts that the market will outperform T-bills.






33. A cost that has already been incurred.






34. The buyer of a derivative contract. Also refers to the position of owning a derivative.






35. Stan-dard errors of the estimated parameters of a regression that correct for the presence of het-eroskedasticity in the regression's error term.






36. The risk attributed to the operating cost structure - in particular the use of fixed costs in operations; the risk arising from the mix of fixed and variable costs; the risk that a company's operations may be severely affected by environ-mental - soc






37. A theory pertaining to a company's optimal capital struc-ture; the optimal level of debt is found at the point where additional debt would cause the costs of financial distress to increase by a greater amount than the benefit of the additional tax sh






38. The risk associated with the pos-sibility that a payment due at a later date will not be made.






39. A balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recove r the differ






40. A reserve created against deferred tax assets - based on the likelihood of realizing the deferred tax assets in future account-ing periods.






41. A trade in two closely related stocks involving the short sale of one and the pur-chase of the other.






42. The estimated gross amount of money that could be realized from the liquidation sale of an asset or assets - given a rea-sonable amount of time to find a purchaser or purchasers.






43. The relationship between the option price and the underlying price - which reflects the sensi-tivity of the price of the option to changes in the price of the underlying.






44. Bias introduced by systemati-cally exclua ing some members of the population according to a particular attribute-for example - the bias introduced when data availability leads to certain observations being excluded from the analysis.






45. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.






46. The existence of an exact linear relation between two or more independent vari-ables or combinations of independent variables.






47. The competitive strategy of being the lowest cost producer while offering products comparable to those of other firms - so that prod-ucts can be priced at or near the industry average.






48. The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entity's liabilities.

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49. A test that is not concerned with a parameter - or that makes minimal assumptions about the population from which a sam Ie comes.






50. The quoted interest rate per period; the stated annual interest rate divided by the number of compounding periods per year.