CFA CFA Level 1 Question of the Week – Alternative Investments

Question of the Week – Alternative Investments

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    • Avatar of AdaptPrepAdaptPrep
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        The commodity market
        initially grew due to producers desiring a hedging vehicle. Recently
        institutions like pension plans and hedge funds have looked to commodities as a
        way to diversify and grow, respectively.

        Which of the following least describes the impact this institutional money has had?

        • Contango has become less extensive
        • Rolls have become more expensive
        • Potential for bubbles has increased
      • Avatar of AdaptPrepAdaptPrep
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          All of the above have been a
          part of the change in commodities except contango becoming less extensive. In fact, the opposite is true. Backwardation used to be
          the norm, since producers had to pay a premium in order to hedge. As investors
          and speculators have increased, that situation has become less prevalent.

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