If you just passed Level I of the CFA exam, congratulations. You’ve got about 10 months to prepare for Level II. However, you may need to start studying a bit earlier this time around. The CFA Institute threw a bit of a wrench in the system by announcing that it is adding questions on fintech, cryptocurrencies and blockchain for Level I and Level II beginning in 2019. It gave us a sneak peek into the curriculum; there is some good news and some bad news.
The sample questions below were included in the readings for both levels. A quick glance will tell you that you won’t have to take an incredibly deep technically dive into crypto or blockchain, though the correct answers aren’t necessarily obvious. The potential cause for concern is for Level II candidates, who will need to be able to answer questions like the practice ones below while also preparing for a crypto-related case study within the infamously-difficult ethics section of exam. The ethics curriculum for Level I doesn’t include any mention of fintech, crypto or blockchain. Either way, both groups will at the very least need enough knowledge to answer questions like these, courtesy of the CFA Institute. Click here or the link below the questions for the correct answers and a short explanation.
1. A correct description of fintech is that it:
A: is driven by rapid growth in data and related technological advances.
B: increases the need for intermediaries.
C: is at its most advanced state using systems that follow specified rules and instructions.
2. A characteristic of Big Data is that:
A: one of its traditional sources is business processes.
B: it involves formats with diverse types of structures.
C: real-time communication of it is uncommon due to vast content.
3. In the use of machine learning (ML):
A: some techniques are termed “black box” due to data biases.
B: human judgment is not needed because algorithms continuously learn from data.
C: training data can be learned too precisely, resulting in inaccurate predictions when used with different datasets.
4: Text Analytics is appropriate for application to:
A: economic trend analysis.
B: large, structured datasets.
C: public but not private information.
5. In providing investment services, robo-advisers are most likely to:
A: rely on their cost effectiveness to pursue active strategies.
B: offer fairly conservative advice as easily accessible guidance.
C: be free from regulation when acting as fully-automated wealth managers.
6. Which of the following statements on fintech’s use of data as part of risk analysis is correct?
A: Stress testing requires precise inputs and excludes qualitative data.
B: Machine learning ensures that traditional and alternative data are fully segregated.
C: For real-time risk monitoring, data may be aggregated for reporting and used as model inputs.
7. A factor associated with the widespread adoption of algorithmic trading is increased:
A: market efficiency.
B: average trade sizes.
C: trading destinations.
8. A benefit of distributed ledger technology (DLT) favoring its use by the investment industry is its:
A: scalability of underlying systems.
B: ease of integration with existing systems.
C: streamlining of current post-trade processes.
9. What is a distributed ledger technology (DLT) application suited for physical assets?
C: Permissioned networks
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