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.
49 questions12 easy27 medium10 hard2026 syllabus
Sample Questions
Question 1
Easy
Which statement BEST distinguishes a classical bit from a qubit before measurement?
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Correct Answer: A
Solution
A is correct. A classical bit represents a definite 0 or 1 at a given time. A qubit can be prepared in a superposition involving the corresponding basis states. The distinction concerns the representation of information and does not establish a universal speed advantage.
Question 2
Medium
Lo and Singh (2023) describe the pipeline used to develop a modern large language model such as ChatGPT. Which of the following correctly describes the sequence of its two core training stages?
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Correct Answer: B
Solution
B is correct. In the pipeline Lo and Singh describe, a large language model is first pretrained without labels on a very large, general text corpus, where it learns the statistical patterns of language. The pretrained model is then fine-tuned on a smaller body of task-specific data to adapt it to particular tasks. Fine-tuning presupposes a pretrained model, so A reverses the stages. C describes earlier supervised NLP models that lack a separate pretraining stage. D swaps the data: the broad corpus is used for pretraining and the narrower data for fine-tuning.
Question 3
Hard
The EBRD's Value Creation in Private Equity working paper analyzes both the value-creation plans (VCPs) general partners write at deal entry and the actions actually implemented during the hold period. Which statement best summarizes the paper's finding on planned versus achieved strategies?
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Correct Answer: B
Solution
B is correct. The EBRD study finds a meaningful wedge between what GPs plan to do at entry and what they actually accomplish during the hold, and it is the *achieved* actions (particularly company-level operational changes and top-line growth) that line up most consistently with higher realized investor returns. The paper specifically highlights that planning the right strategy is not the same as executing it, so observed performance is best predicted by completed actions rather than stated intent.
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