QIA flashcards
QIA · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Fiduciary duty
- A legal obligation to act in the client's best interest, disclosing conflicts and seeking best execution, which is stricter than a mere suitability standard.
- Form ADV Part 2
- The client-facing brochure that discloses an adviser's services, fees, conflicts of interest, disciplinary history, and other material information.
- Code of ethics
- Written standards addressing personal trading, insider trading, and conflicts, often requiring pre-clearance of certain trades by advisory staff.
- Custody rule trigger
- Holding client assets directly or with authority to withdraw generally requires surprise annual examination by an independent accountant and disclosure.
- Recordkeeping retention
- Books and records generally must be kept for five years, with the first two years readily accessible at the adviser's office.
- Bond price-yield relationship
- Bond prices move inversely to yields; longer maturity and lower coupon increase price sensitivity, measured by duration and convexity.
- Limit order
- An order to buy or sell at a specified price or better, offering price certainty but no guarantee of execution.
- ETF premium or discount
- The difference between an ETF's market price and its net asset value, arising from intraday supply and demand and arbitrage frictions.
- Option premium
- The price the buyer pays the writer for an option, reflecting intrinsic value plus time value and implied volatility.
- Yield curve inversion
- A condition where short-term interest rates exceed long-term rates, often associated with expectations of economic slowdown.
- Portfolio variance
- A measure of total portfolio risk that includes weighted asset variances plus covariance terms reflecting how assets move together.
- Efficient frontier
- The set of portfolios offering the highest expected return for each level of risk, given the available assets and constraints.
- Capital Asset Pricing Model
- A model pricing an asset as the risk-free rate plus beta times the market risk premium, rewarding only systematic risk.
- Sharpe ratio
- Excess return over the risk-free rate divided by standard deviation, measuring return per unit of total risk.
- Strategic asset allocation
- Long-term target weights across asset classes set from the investor's objectives and constraints, forming the portfolio's policy benchmark.
- Rebalancing
- Periodically returning portfolio weights to targets, which controls risk drift and enforces a disciplined sell-high, buy-low process.
- Dividend discount model
- A valuation formula pricing a stock as next year's dividend divided by the required return minus sustainable growth, valid when return exceeds growth.
- Weighted average cost of capital
- The blended after-tax cost of debt and equity weighted by market values, used to discount free cash flow to the firm.
- DuPont analysis
- Decomposing return on equity into net profit margin, asset turnover, and financial leverage to explain sources of profitability.
- Margin of safety
- The gap between estimated intrinsic value and market price, providing a buffer against estimation error and adverse developments.
- Relative valuation
- Valuing an asset by comparing price multiples such as P/E or EV/EBITDA to peers matched on growth, risk, and capital structure.
- Systematic risk
- Market-wide risk that cannot be diversified away and is the only risk compensated with a risk premium in equilibrium models.
- Value at risk
- An estimate of the maximum loss expected over a given horizon at a stated confidence level, based on a chosen model.
- Duration
- A measure of a bond's price sensitivity to yield changes, approximating the percentage price change for a one percent yield shift.
- Risk tolerance conflict
- When ability to bear risk and willingness to bear risk differ, the more conservative capacity generally governs the recommendation.
- Liquidity risk
- The risk of being unable to trade quickly at a fair price, or of being unable to meet funding obligations when due.
- Material nonpublic information
- Information not publicly available that could affect a security's price; trading or causing others to trade on it is prohibited.
- Mosaic theory
- Assembling public and nonmaterial nonpublic information into an investment conclusion is permitted; acting on material nonpublic data is not.
- Fair dealing
- The duty to treat all clients equitably, avoid preferential treatment, and disseminate material information rather than share it selectively.
- Know-your-client
- The process of gathering a client's objectives, horizon, risk tolerance, liquidity needs, tax status, and constraints before recommending investments.
- Investment policy statement
- A document recording a client's objectives, constraints, and guidelines that anchors portfolio decisions and limits behavioral drift.
- Tax-loss harvesting
- Realizing capital losses to offset gains, subject to wash-sale rules that disallow losses on substantially identical repurchases within 30 days.