Quiz
mm2
Create a free account to finish this quiz
Save your progress and see your final score.
Already have an account? Sign in
Questions in this quiz (30)
1To trade a large order quickly while minimizing market impact, a trader would use a(n):
- Ascheduled algorithm.
- Barrival price algorithm.
- Cliquidity-seeking algorithm.
2A scheduled algorithm is appropriate for orders in which the trader/PM:
- Aexpects an adverse trending market.
- Bis concerned about minimizing market impact.
- Cis risk-averse and wished to minimize execution/market risk.
3The most subjective type of price benchmark is:
- Aintraday
- Bpre-trade
- Cprice target.
4A portfolio manager executes a buy order at an average price of $64.88. The arrival price at the time of the order was $64.50. Prior to trading, the trader performs pre-trade analysis of the order and finds that the expected cost of the trade is 62 bps. Calculate the added value in bps.
- A-3 bps.
- B3 bps.
- C59 bps
5A portfolio manager executes a sell order at an average price of $31.84. The TWAP over the trading horizon is $31.90. The arrival price on the order was $32.01. Calculate the TWAP cost in bps.
- A-19 bps.
- B+19 bps.
- C+53 bps.
6A portfolio manager executes a buy order at an average price of $15.26. The VWAP over the trading horizon is $15.24. The opening price on the stock was $15.15. Calculate the VWAP cost in bps.
- A-13 bps.
- B+13 bps.
- C+77 bps.
7Consider the following trade details:
Decision Price $11.15
Trade Size 21,000
Order Filled:
10,000 shares $11.20
5,000 shares $11.28
4,000 shares $11.36
Terminal Price $11.61
Total Fees $285
Calculate total execution costs.- A$1,990
- B$2,275
- C$6,465
8Knowing which broker is best suited to execute a trade can help reduce:
- Adelay costs.
- Bexecution costs.
- Copportunity costs.
9Knowing the order size and share quantity most likely to be executed in the market will help reduce:
- Adelay costs.
- Bexecution costs
- Copportunity costs.
10For large non-urgent trades, high-touch agency and trading algorithms are generally used for:
High-touch Agency Trading Algorithm
Option A Fixed-Income and OTC Derivatives Exchange-traded Derivatives and Forex
Option B Fixed-income and Forex Exchange-traded Derivatives and Equity
Option C OTC Derivatives and Forex Equity and Forex- AOption A
- BOption B
- COption C
11Large non-urgent trades in exchange-traded derivatives are typically handled by:
- Aalgorithmic trading.
- Bdirect market access.
- Chigh-tough agency trades.
12A large urgent equity trade in a liquid stock would most likely be handled by using a:
- Atrading algorithm.
- Bhigh-tough agency trade.
- Chigh-tough principal trade.
13A trader must buy 100,000 shares of a stock. The trade represents 20% of the ADV. The trader needs to complete the order today and feels the market can absorb the extra volume without undue market impact. The trader does not want to alert other traders that significant volume is coming in on the bid, however. The trader will least likely use a:
- Aparticipation algorithm.
- Bopportunistic algorithm.
- Cliquidity-seeking algorithm.
14The class of algorithms tasked with transacting an investment decision made by the portfolio manager is referred to as:
- Acash flow algorithms.
- Bexecution algorithms.
- Cprofit-seeking algorithms.
15The class of algorithms that determines what to buy are referred to as:
- Acash flow algorithms.
- Bexecution algorithms.
- Cprofit-seeking algorithms.
16Which implementation approach is suitable for a trade in an illiquid security in which a broker risk trade did not take place first?
- AHigh touch agency.
- BHigh touch principal.
- CLow touch automated.
17Which implementation choice is suitable for a trade in which finding a buyer or seller is difficult?
- AHigh touch agency.
- BHigh touch principal.
- CLow touch automated.
18The price benchmark most often used by quantitative PMs is:
- Aarrival price.
- Bopening price.
- Cprevious close.
19Which trade, if executed with a limit order, has the highest potential execution risk?
Order Size ADV Volatility
A 20K 1M 12%
B 20K 2M 21%
C 30K 3M 18%- AOrder A.
- BOrder B.
- COrder C.
20Which sell order, in an up-trending market, would be least likely to use limit orders?
Order Size ADV
A 5,000 50,000
B 15,000 600,000
C 50,000 1,000,000- AOrder A.
- BOrder B.
- COrder C.
21Executing a large buy order in an up-trending market can be accomplished with:
- Amarket orders to minimize market risk.
- Blimit orders to minimize execution costs.
- Cmarket orders to minimize market impact.
22Trade urgency will most likely be the highest when:
- Abuying in a down-trending market.
- Bthe portfolio manager has a high level of risk aversion.
- Cthe portfolio manager is more concerned about market impact costs.
23Execution costs will most likely be the highest when using limit orders to:
- Aexecute a large sell order in an up-trending market.
- Bexecute a large buy order in an up-trending market.
- Cexecute a large buy order in a down-trending market.
24An equity fund manager, after assessing the latest macroeconomic data, feels the market is near a sell-off point. The fund manager sells equity futures that day to lower portfolio beta in hopes of delivering superior performance versus the market index. The fund manager is motivated to trade the futures market based on:
- Ahedging.
- Bprofit-seeking.
- Ccash flow needs.
25Risk aversion refers to:
- Ahow quickly/slowly an order can be executed over the trading time horizon.
- Bhow much risk the portfolio manager or trader is willing to accept during trading.
- Cthe erosion/deterioration of short-term alpha once an investment decision is made.
26Alpha decay refers to:
- Ahow quickly/slowly an order can be executed over the trading time horizon.
- Bhow much risk the portfolio manager or trader is willing to accept during trading.
- Cthe erosion/deterioration of short-term alpha once an investment decision is made.
27Alternative trading systems provide:
- Apre-trade transparency only.
- Bpost-trade transparency only.
- Cboth pre- and post-trade transparency.
28Identify a typical primary investment objective of an endowment.
- ATo outperform, over the long-term, a blended custom benchmark based on the current policy allocation.
- BTo achieve a total real rate of return of 5% with expected volatility less than 15% over the next 5 – 7 years.
- CTo maintain the purchasing power of the assets into perpetuity while achieving investment returns sufficient to sustain the level of spending necessary to support the university budget.
29Identify a typical secondary investment objective of a foundation.
- ATo outperform the policy benchmark with tracking error no more than 2.5%.
- BTo preserve the purchasing power of the assets and support the grant-making program of the foundation.
- CTo generate a real return of 5% plus investment expense with less than 12% volatility over the next 3 – 5 years.
30Identify a typical primary investment objective of a foundation.
- ATo outperform the policy benchmark with tracking error no more than 2.5%.
- BTo preserve the purchasing power of the assets and support the grant-making program of the foundation.
- CTo generate a real return of 5% plus investment expense with less than 12% volatility over the next 3 – 5 years.
Information
- Description
- Portfolio Management Quiz on mm2, created by Amit Mehta on 22/03/2020.
- Author
- Amit Mehta
- Language
- English
- Views
- 1
- Tags
- Rating
- No ratings yet Rate this quiz