Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Chartered Alternative Investment Analyst Association (CAIA) Exam with structured quizzes, flashcards, and detailed explanations. Study efficiently and boost your confidence for the test!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is the key feature of the secondary market?

Trading of initial shares
Direct transactions between institutions
Buying and selling of previously issued securities
Exchange of currency for securities

The correct answer is: Buying and selling of previously issued securities

The key feature of the secondary market is the buying and selling of previously issued securities. This market facilitates transactions among investors who are trading securities that have already been issued in the primary market. In essence, the secondary market provides liquidity to investors, allowing them to adjust their portfolios and exit positions without needing to wait for a new issuance. In the secondary market, securities are sold between investors, which can include stocks, bonds, and other financial instruments. This contrasts with the primary market, where securities are created and sold for the first time. The presence of a secondary market is essential for enabling price discovery and providing an ongoing valuation for securities based on supply and demand dynamics.