Free CAIA Level II Emerging Topics Practice Questions
Emerging Topics carries 10% of CAIA Level II and is tested only in the constructed-response section (CAIA Association). The 2026 readings cover Web 3.0 tokenization, language models from ELIZA to ChatGPT, long-term investor performance, value creation in private equity, scale, scope, and speed in private capital funds, managing liquidity for capital calls, the Takahashi-Alexander model revisited, and direct value creation in the pension fund industry. The multiple-choice practice here is the concept check behind the written response.
44 questions8 easy23 medium13 hard2026 syllabus
Sample Questions
Question 1
Easy
Which of the following best describes tokenization of alternative assets?
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Correct Answer: D
Solution
D is correct. Tokenization creates digital tokens on a distributed ledger that represent fractional ownership or other economic rights in an underlying asset (real estate, private equity stakes, art, infrastructure). The structure enables fractional access, programmable transferability, and potential secondary-market liquidity for traditionally illiquid alternative investments.
Question 2
Medium
An adviser to a US private equity fund is preparing to comply with the SEC's Private Fund Adviser Rules. Which practice most directly addresses the rule's quarterly statement requirement?
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Correct Answer: D
Solution
D is correct. The Private Fund Adviser Rules require advisers to deliver quarterly statements that disclose, in a standardized format, fund-level fees and expenses, adviser compensation, and performance metrics. The objective is to give limited partners comparable, timely information across funds and prevent selective disclosure. Standardized periodic LP reporting is precisely the conduct the quarterly-statement rule is designed to enforce.
Question 3
Hard
In the original Takahashi-Alexander (Yale) private-equity cash-flow model, the bow factor is best described as the parameter that:
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Correct Answer: B
Solution
B is correct. The bow factor governs the shape of the distribution curve over the fund's life: a higher bow factor delays the bulk of distributions toward later years, while a lower bow factor pulls them forward. Capital calls in Takahashi-Alexander are driven by a separate rate-of-contribution parameter, and discounting and secondary pricing sit entirely outside the model.
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