**2024 CFA Program Curriculum Level I Box Set Volumes 1 – 6 by CFA Institute, ISBN-13: 978-1953337672**

[PDF eBook eTextbook] – **Available Instantly**

- Publisher: Wiley; 1st edition (May 23, 2023)
- Language: English
- ISBN-10: 1953337678
- ISBN-13: 978-1953337672

**Discover the official resource for success on the 2024 CFA Level I exam. Get your copy of the CFA ^{®} Program Curriculum now.**

The ** 2024 CFA Program Curriculum Level I Box Set** contains the content you need to perform well on the Level I CFA exam in 2024. Designed for candidates to use for exam preparation and professional reference purposes, this set includes the full official curriculum for Level I and is part of the larger CFA Candidate Body of Knowledge (CBOK).

Covering all ten core topics found on the Level I exam, the *2024 CFA Program Curriculum Level I Box Set *helps you:

- Develop critical knowledge and skills essential in the industry.
- Learn from financial thought leaders.
- Access market-relevant instruction.

The set also features practice questions to assist with your mastery of key terms, concepts, and formulas. Volumes include:

- Volume 1: Quantitative Methods
- Volume 2:
and Financial Statement Analysis**Economics** - Volume 3: Financial Statement Analysis and Corporate Issuers
- Volume 4: Corporate Issuers, Equity Investments, and Fixed Income
- Volume 5: Fixed Income, Derivatives, Alternative Investments, and Portfolio Management
- Volume 6:
and Ethical and Professional Standards**Portfolio Management**

Indispensable for anyone preparing for the 2024 Level I CFA exam, the *2024 CFA Program Curriculum Level I Box Set* is a must-have resource for those seeking the foundational skills required to become a **Chartered Financial Analyst**^{®}.

**Table of Contents:**

Cover

Copyright Page

Table of Contents

2024 CFA Program Curriculum Level 1 Volume 1: Quantitative Methods, Economics

Title Page

Table of Contents

How to Use the CFA Program Curriculum

Errata

Designing Your Personal Study Program

CFA Institute Learning Ecosystem (LES)

Prerequisite Knowledge

Feedback

Quantitative Methods

Rates and Returns

Learning Outcomes

1. Introduction

2. Interest Rates and Time Value of Money

2.1. Determinants of Interest Rates

3. Rates of Return

3.1. Holding Period Return

3.2. Arithmetic or Mean Return

3.3. Geometric Mean Return

3.4. The Harmonic Mean

4. Money-Weighted and Time-Weighted Return

4.1. Calculating the Money Weighted Return

4.1.1. Money-Weighted Return for a Dividend-Paying Stock

4.1.2. Time-Weighted Returns

4.1.2.1. Computing Time-Weighted Returns

5. Annualized Return

5.1. Non-annual Compounding

5.2. Annualizing Returns

5.3. Continuously Compounded Returns

6. Other Major Return Measures and Their Applications

6.1. Gross and Net Return

6.2. Pre-Tax and After-Tax Nominal Return

6.3. Real Returns

6.4. Leveraged Return

Practice Problems

Solutions

Time Value of Money in Finance

Learning Outcomes

1. Introduction

2. Time Value of Money in Fixed Income and Equity

2.1. Fixed-Income Instruments and the Time Value of Money

2.1.1. Discount Instruments

2.1.2. Coupon Instrument

2.1.3. Annuity Instruments

2.2. Equity Instruments and the Time Value of Money

3. Implied Return and Growth

3.1. Implied Return for Fixed-Income Instruments

3.2. Equity Instruments, Implied Return, and Implied Growth

4. Cash Flow Additivity

4.1. Implied Forward Rates Using Cash Flow Additivity

4.2. Forward Exchange Rates Using No Arbitrage

4.3. Option Pricing Using Cash Flow Additivity

Practice Problems

Solutions

Statistical Measures of Asset Returns

Learning Outcomes

1. Introduction

2. Measures of Central Tendency and Location

2.1. Measures of Central Tendency

2.1.1. The Arithmetic Mean

2.1.2. The Sample Mean

2.1.3. The Median

2.1.4. The Mode

2.2. Dealing with Outliers

2.3. Measures of Location

2.3.1. Quartiles, Quintiles, Deciles, and Percentiles

2.3.2. Quantiles in Investment Practice

3. Measures of Dispersion

3.1. The Range

3.2. Mean Absolute Deviations

3.3. Sample Variance and Sample Standard Deviation

3.3.1. Sample Variance

3.3.2. Sample Standard Deviation

3.4. Downside Deviation and Coefficient of Variation

3.4.1. Downside Deviation

3.4.2. Coefficient of Variation

4. Measures of Shape of a Distribution

4.1.

4.1.1. Skewness

4.1.2. Kurtosis

5. Correlation between Two Variables

5.1. Scatter Plot

5.2. Covariance and Correlation

5.3. Properties of Correlation

5.4. Limitations of Correlation Analysis

Practice Problems

Solutions

Probability Trees and Conditional Expectations

Learning Outcomes

1. Introduction

2. Expected Value and Variance

3. Probability Trees and Conditional Expectations

3.1. Total Probability Rule for Expected Value

4. Bayes’ Formula and Updating Probability Estimates

4.1. Bayes’ Formula

Practice Problems

Solutions

Portfolio Mathematics

Learning Outcomes

1. Introduction

2. Portfolio Expected Return and Variance of Return

2.1. Covariance

2.2. Correlation

3. Forecasting Correlation of Returns: Covariance Given a Joint Probability Function

4. Portfolio Risk Measures: Applications of the Normal Distribution

References

Practice Problems

Solutions

Simulation Methods

Learning Outcomes

1. Introduction

2. Lognormal Distribution and Continuous Compounding

2.1. The Lognormal Distribution

2.2. Continuously Compounded Rates of Return

3. Monte Carlo Simulation

4. Bootstrapping

Practice Problems

Solutions

Estimation and Inference

Learning Outcomes

1. Introduction

2. Sampling Methods

2.1. Simple Random Sampling

2.2. Stratified Random Sampling

2.3. Cluster Sampling

2.4. Non-Probability Sampling

2.5. Sampling from Different Distributions

3. Central Limit Theorem and Inference

3.1. The Central Limit Theorem

3.2. Standard Error of the Sample Mean

4. Bootstrapping and Empirical Sampling Distributions

Practice Problems

Solutions

Hypothesis Testing

Learning Outcomes

1. Introduction

2. Hypothesis Tests for Finance

2.1. The Process of Hypothesis Testing

2.1.1. Stating the Hypotheses

2.1.2. Identify the Appropriate Test Statistic and Distribution

2.1.3. Specify the Level of Significance

2.1.4. State the Decision Rule

3. Tests of Return and Risk in Finance

3.1. Test Concerning Differences between Means with Dependent Samples

3.2. Test Concerning the Equality of Two Variances

4. Parametric versus Nonparametric Tests

4.1. Uses of Nonparametric Tests

4.2. Nonparametric Inference: Summary

Practice Problems

Solutions

Parametric and Non-Parametric Tests of Independence

Learning Outcomes

1. Introduction

2. Tests Concerning Correlation

2.1. Parametric Test of a Correlation

2.2. Non-Parametric Test of Correlation: The Spearman Rank Correlation Coefficient

3. Tests of Independence Using Contingency Table Data

Practice Problems

Solutions

Simple Linear Regression

Learning Outcomes

1. Introduction

2. Estimation of the Simple Linear Regression Model

2.1. Introduction to Linear Regression

2.2. Estimating the Parameters of a Simple Linear Regression

2.2.1. The Basics of Simple Linear Regression

2.2.2. Estimating the Regression Line

2.2.3. Interpreting the Regression Coefficients

2.2.4. Cross-Sectional versus Time-Series Regressions

3. Assumptions of the Simple Linear Regression Model

3.1. Assumption 1: Linearity

3.2. Assumption 2: Homoskedasticity

3.3. Assumption 3: Independence

3.4. Assumption 4: Normality

4. Hypothesis Tests in the Simple Linear Regression Model

4.1. Analysis of Variance

4.1.1. Breaking Down the Sum of Squares Total into Its Components

4.2. Measures of Goodness of Fit

4.3. Hypothesis Testing of Individual Regression Coefficients

4.3.1. Hypothesis Tests of the Slope Coefficient

4.3.2. Hypothesis Tests of the Intercept

4.3.3. Hypothesis Tests of Slope When the Independent Variable Is an Indicator Variable

4.3.4. Test of Hypotheses: Level of Significance and p-Values

5. Prediction in the Simple Linear Regression Model

5.1. ANOVA and Standard Error of Estimate in Simple Linear Regression

5.2. Prediction Using Simple Linear Regression and Prediction Intervals

6. Functional Forms for Simple Linear Regression

6.1. The Log-Lin Model

6.2. The Lin-Log Model

6.3. The Log-Log Model

6.4. Selecting the Correct Functional Form

Practice Problems

Solutions

Introduction to Big Data Techniques

Learning Outcomes

1. Introduction

2. How Is Fintech used in Quantitative Investment Analysis?

2.1. Big Data

2.1.1. Sources of Big Data

2.1.2. Big Data Challenges

3. Advanced Analytical Tools: Artificial Intelligence and Machine Learning

4. Tackling Big Data with Data Science

4.1. Data Processing Methods

4.2. Data Visualization

4.3. Text Analytics and Natural Language Processing

Practice Problems

Solutions

Appendices A-E

1. Appendices A-E

Economics

The Firm and Market Structures

Learning Outcomes

1. Introduction

2. Profit Maximization: Production Breakeven, Shutdown and Economies of Scale

2.1. Profit-Maximization, Breakeven, and Shutdown Points of Production

2.2. Breakeven Analysis and Shutdown Decision

2.3. The Shutdown Decision

2.4. Economies and Diseconomies of Scale with Short-Run and Long-Run Cost Analysis

2.4.1. Short- and Long-Run Cost Curves

2.4.2. Defining Economies of Scale and Diseconomies of Scale

3. Introduction to Market Structures

3.1. Analysis of Market Structures

3.1.1. Factors That Determine Market Structure

3.1.2. Characteristics of Market Structure

4. Monopolistic Competition

4.1. Demand Analysis in Monopolistically Competitive Markets

4.2. Supply Analysis in Monopolistically Competitive Markets

4.3. Optimal Price and Output in Monopolistically Competitive Markets

4.4. Long-Run Equilibrium in Monopolistic Competition

5. Oligopoly

5.1. Oligopoly and Pricing Strategies

5.2. Demand Analysis and Pricing Strategies in Oligopoly Markets

5.3. The Cournot Assumption

5.4. The Nash Equilibrium

5.5. Oligopoly Markets: Optimal Price, Output, and Long-Run Equilibrium

5.5.1. Optimal Price and Output in Oligopoly Markets

5.5.2. Factors Affecting Long-Run Equilibrium in Oligopoly Markets

6. Determining Market Structure

6.1. Econometric Approaches

6.2. Simpler Measures

Practice Problems

Solutions

Understanding Business Cycles

Learning Outcomes

1. Introduction

2. Overview of the Business Cycle

2.1. Phases of the Business Cycle

2.1.1. Types of Cycles

2.1.2. Practical Issues

2.1.3. Four Phases of the Cycle

2.2. Leads and Lags in Business and Consumer Decision Making

2.3. Market Conditions and Investor Behavior

2.3.1. Recovery Phase

2.3.2. Expansion Phase

2.3.3. Slowdown Phase

2.3.4. Contraction Phase

3. Credit Cycles

3.1. Applications of Credit Cycles

3.2. Consequences for Policy

4. Economic Indicators over the Business Cycle

4.1. The Workforce and Company Costs

4.2. Fluctuations in Capital Spending

4.3. Fluctuations in Inventory Levels

4.4. Economic Indicators

4.5. Types of Indicators

4.6. Composite Indicators

4.7. Leading Indicators

4.8. Using Economic Indicators

4.9. Other Composite Leading Indicators

4.10. Surveys

4.11. The Use of Big Data in Economic Indicators

4.12. Nowcasting

4.13. GDPNow

Practice Problems

Solutions

Fiscal Policy

Learning Outcomes

1. Introduction

2. Introduction to Monetary and Fiscal Policy

3. Roles and Objectives of Fiscal Policy

3.1. Roles and Objectives of Fiscal Policy

3.1.1. Fiscal Policy and Aggregate Demand

3.1.2. Government Receipts and Expenditure in Major Economies

3.2. Deficits and the National Debt

4. Fiscal Policy Tools

4.1. The Advantages and Disadvantages of Different Fiscal Policy Tools

4.2. Modeling the Impact of Taxes and Government Spending: The Fiscal Multiplier

4.3. The Balanced Budget Multiplier

5. Fiscal Policy Implementation

5.1. Deficits and the Fiscal Stance

5.2. Difficulties in Executing Fiscal Policy

Practice Problems

Solutions

Monetary Policy

Learning Outcomes

1. Introduction

2. Role of Central Banks

2.1. Roles of Central Banks and Objectives of Monetary Policy

2.2. The Objectives of Monetary Policy

3. Monetary Policy Tools and Monetary Transmission

3.1. Open Market Operations

3.2. The Central Bank’s Policy Rate

3.3. Reserve Requirements

3.4. The Transmission Mechanism

4. Monetary Policy Objectives

4.1. Inflation Targeting

4.2. Central Bank Independence

4.3. Credibility

4.4. Transparency

4.4.1. The Target

4.4.2. The Main Exceptions to the Inflation-Targeting Rule

4.5. The Bank of Japan

4.6. The US Federal Reserve System

4.6.1. Monetary Policy in Developing Countries

4.7. Exchange Rate Targeting

4.8. Contractionary and Expansionary Monetary Policies and Their Limitations

4.9. What’s the Source of the Shock to the Inflation Rate?

4.10. Limitations of Monetary Policy

4.10.1. Problems in the Monetary Transmission Mechanism

4.10.2. Interest Rate Adjustment in a Deflationary Environment and Quantitative Easing as a Response

4.10.3. Limitations of Monetary Policy: Summary

5. Interaction of Monetary and Fiscal Policy

5.1. The Relationship Between Monetary and Fiscal Policy

5.1.1. Factors Influencing the Mix of Fiscal and Monetary Policy

5.1.2. Quantitative Easing and Policy Interaction

5.1.3. The Importance of Credibility and Commitment

Practice Problems

Solutions

Introduction to Geopolitics

Learning Outcomes

1. Introduction

2. National Governments and Political Cooperation

2.1. State and Non-State Actors

2.2. Features of Political Cooperation

2.2.1. National Security or Military Interest

2.2.2. Economic Interest

2.3. Resource Endowment, Standardization, and Soft Power

2.3.1. Geophysical Resource Endowment

2.3.2. Standardization

2.3.3. Cultural Considerations and Soft Power

2.4. The Role of Institutions

2.5. Hierarchy of Interests and Costs of Cooperation

2.6. Power of the Decision Maker

2.7. Political Non-Cooperation

3. Forces of Globalization

3.1. Features of Globalization

3.2. Motivations for Globalization

3.2.1. Increasing Profits

3.2.1.1. Increasing sales

3.2.1.2. Reducing costs

3.2.2. Access to Resources and Markets

3.2.3. Intrinsic Gain

3.3. Costs of Globalization and Threats of Rollback

3.3.1. Unequal Accrual of Economic and Financial Gains

3.3.2. Lower Environmental, Social, and Governance Standards

3.3.3. Political Consequences

3.3.4. Interdependence

3.4. Threats of Rollback of Globalization

4. International Trade Organizations

4.1. Role of the International Monetary Fund

4.2. World Bank Group and Developing Countries

4.3. World Trade Organization and Global Trade

5. Assessing Geopolitical Actors and Risk

5.1. Archetypes of Country Behavior

5.1.1. Autarky

5.1.2. Hegemony

5.1.3. Multilateralism

5.1.4. Bilateralism

6. The Tools of Geopolitics

6.1. The Tools of Geopolitics

6.1.1. National Security Tools

6.1.2. Economic Tools

6.1.3. Financial Tools

6.2. Multifaceted Approaches

6.3. Geopolitical Risk and Comparative Advantage

7. Geopolitical Risk and the Investment Process

7.1. Types of Geopolitical Risk

7.2. Assessing Geopolitical Threats

7.2.1. Likelihood

7.2.2. Velocity

7.3. Impact of Geopolitical Risk

7.3.1. Scenario Analysis

7.4. Tracking Risks According to Signposts

7.5. Manifestations of Geopolitical Risk

7.6. Acting on Geopolitical Risk

Practice Problems

Solutions

International Trade

Learning Outcomes

1. Introduction

2. Benefits and Costs of Trade

2.1. Benefits and Costs of International Trade

3. Trade Restrictions and Agreements—Tariffs, Quotas, and Export Subsidies

3.1. Tariffs

3.2. Quotas

3.3. Export Subsidies

4. Trading Blocs and Regional Integration

4.1. Types Of Trading Blocs

4.2. Regional Integration

4.2.1. Trade Creation and Diversion

4.2.2. Costs and Benefits of Regional Trading Blocs

4.2.3. Challenges to Deeper Integration

4.2.4. Investment Implications

Practice Problems

Solutions

Capital Flows and the FX Market

Learning Outcomes

1. Introduction

2. The Foreign Exchange Market and Exchange Rates

2.1. Introduction and the Foreign Exchange Market

2.1.1. The FX Market

2.2. Market Participants

2.3. Market Composition

2.4. Exchange Rate Quotations

3. Exchange Rate Regimes: Ideals and Historical Perspective

3.1. The Ideal Currency Regime

3.2. Historical Perspective on Currency Regimes

3.3. A Taxonomy of Currency Regimes

3.3.1. Arrangements with No Separate Legal Tender

3.3.2. Currency Board System

3.3.3. Fixed Parity

3.3.4. Target Zone

3.3.5. Active and Passive Crawling Pegs

3.3.6. Fixed Parity with Crawling Bands

3.3.7. Managed Float

3.3.8. Independently Floating Rates

3.4. Exchange Rates and the Trade Balance: Introduction

4. Capital Restrictions

Practice Problems

Solutions

Exchange Rate Calculations

Learning Outcomes

1. Introduction

2. Cross-Rate Calculations

3. Forward Rate Calculations

3.1. Arbitrage Relationships

3.2. Forward Discounts and Premiums

Practice Problems

Solutions

Glossary

2024 CFA Program Curriculum Level 1 Volume 2: Portfolio Management, Corporate Issuers, Financial Statement Analysis

Title Page

Table of Contents

How to Use the CFA Program Curriculum

Errata

Designing Your Personal Study Program

CFA Institute Learning Ecosystem (LES)

Prerequisite Knowledge

Feedback

Portfolio Management

Portfolio Risk and Return: Part I

Learning Outcomes

1. Introduction

2. Historical Return and Risk

2.1. Nominal Returns of Major US Asset Classes

2.2. Real Returns of Major US Asset Classes

2.3. Nominal and Real Returns of Asset Classes in Major Countries

2.4. Risk of Major Asset Classes

2.5. Risk–Return Trade-off

3. Other Investment Characteristics

3.1. Distributional Characteristics

3.1.1.

3.1.1.1. Skewness

3.1.1.2. Kurtosis

3.2. Market Characteristics

4. Risk Aversion and Portfolio Selection

4.1. The Concept of Risk Aversion

4.1.1. Risk Seeking

4.1.2. Risk Neutral

4.1.3. Risk Averse

4.1.4. Risk Tolerance

5. Utility Theory and Indifference Curves

5.1. Indifference Curves

6. Application of Utility Theory to Portfolio Selection

7. Portfolio Risk & Portfolio of Two Risky Assets

7.1. Portfolio of Two Risky Assets

7.1.1. Portfolio Return

7.1.2. Portfolio Risk

7.1.3. Covariance and Correlation

7.1.4. Relationship between Portfolio Risk and Return

8. Portfolio of Many Risky Assets

8.1. Importance of Correlation in a Portfolio of Many Assets

9. The Power of Diversification

9.1. Correlation and Risk Diversification

9.2. Historical Risk and Correlation

9.3. Historical Correlation among Asset Classes

9.4. Avenues for Diversification

10. Efficient Frontier: Investment Opportunity Set & Minimum Variance Portfolios

10.1. Investment Opportunity Set

10.1.1. Addition of Asset Classes

10.2. Minimum-Variance Portfolios

10.2.1. Minimum-Variance Frontier

10.2.2. Global Minimum-Variance Portfolio

10.2.3. Efficient Frontier of Risky Assets

11. Efficient Frontier: A Risk-Free Asset and Many Risky Assets

11.1. Capital Allocation Line and Optimal Risky Portfolio

11.2. The Two-Fund Separation Theorem

12. Efficient Frontier: Optimal Investor Portfolio

12.1. Investor Preferences and Optimal Portfolios

13. Summary

References

Practice Problems

Solutions

Portfolio Risk and Return: Part II

Learning Outcomes

1. Introduction

2. Capital Market Theory: Risk-Free and Risky Assets

2.1. Portfolio of Risk-Free and Risky Assets

2.1.1. Combining a Risk-Free Asset with a Portfolio of Risky Assets

2.1.2. Does a Unique Optimal Risky Portfolio Exist?

3. Capital Market Theory: The Capital Market Line

3.1. Passive and Active Portfolios

3.2. What Is the “Market”?

3.3. The Capital Market Line (CML)

4. Capital Market Theory: CML – Leveraged Portfolios

4.1. Leveraged Portfolios with Different Lending and Borrowing Rates

5. Systematic and Nonsystematic Risk

5.1. Systematic Risk and Nonsystematic Risk

5.1.1. Pricing of Risk

6. Return Generating Models

6.1. Return-Generating Models

6.1.1. Three-Factor and Four-Factor Models

6.1.2. The Single-Index Model

6.2. Decomposition of Total Risk for a Single-Index Model

6.3. Return-Generating Models: The Market Model

7. Calculation and Interpretation of Beta

7.1. Estimation of Beta

7.2. Beta and Expected Return

8. Capital Asset Pricing Model: Assumptions and the Security Market Line

8.1. Assumptions of the CAPM

8.2. The Security Market Line

8.2.1. Portfolio Beta

9. Capital Asset Pricing Model: Applications

9.1. Estimate of Expected Return

10. Beyond CAPM: Limitations and Extensions of CAPM

10.1. Limitations of the CAPM

10.1.1. Theoretical Limitations of the CAPM

10.1.2. Practical Limitations of the CAPM

10.2. Extensions to the CAPM

10.2.1. Theoretical Models

10.2.2. Practical Models

11. Portfolio Performance Appraisal Measures

11.1. The Sharpe Ratio

11.2. The Treynor Ratio

11.3. M2: Risk-Adjusted Performance (RAP)

11.4. Jensen’s Alpha

12. Applications of the CAPM in Portfolio Construction

12.1. Security Characteristic Line

12.2. Security Selection

12.3. Implications of the CAPM for Portfolio Construction

13. Summary

References

Practice Problems

Solutions

Corporate Issuers

Organizational Forms, Corporate Issuer Features, and Ownership

Learning Outcomes

1. Introduction

2. Organizational Forms of Businesses

2.1. Organizational Forms of Businesses

2.2. Sole Trader or Proprietorship

2.3. Partnerships

2.4. Limited Companies

3. Key Features of Corporate Issuers

3.1. Legal Identity

3.2. Owner–Manager Separation

3.3. Owner/Shareholder Liability

3.4. External Financing

3.5. Taxation

4. Publicly vs. Privately Owned Corporate Issuers

4.1. Exchange Listing, Liquidity, and Price Transparency

4.2. Share Issuance

4.3. Registration and Disclosure Requirements

4.4. Going from Private to Public

4.5. Going from Public to Private

4.6. The Varieties of Corporate Owners

Practice Problems

Solutions

Investors and Other Stakeholders

Learning Outcomes

1. Introduction

2. Financial Claims of Lenders and Shareholders

2.1. Debt Versus Equity

2.1.1. Debt and Equity Claims

2.2. Debt Versus Equity: Risk and Return

2.3. Conflicts of Interest among Lenders and Shareholders

3. Corporate Stakeholders and Governance

3.1. Shareholders versus Stakeholders

3.2. Investors

3.3. Board of Directors

3.4. Managers

3.5. Employees

3.6. Customers

3.7. Suppliers

3.8. Governments

4. Corporate ESG Considerations

4.1. Environmental Factors

4.2. Social Factors

4.3. Governance Factors

4.4. Evaluating ESG-Related Risks and Opportunities

Practice Problems

Solutions

Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits

Learning Outcomes

1. Introduction

2. Stakeholder Conflicts and Management

2.1. Shareholder, Board Director, and Manager Relationships

2.2. Controlling and Minority Shareholder Relationships

2.3. Shareholder versus Creditor Interests

3. Corporate Governance Mechanisms

3.1. Corporate Reporting and Transparency

3.2. Shareholder Mechanisms

3.2.1. Shareholder Meetings

3.2.2. Shareholder Activism

3.2.3. Shareholder Litigation

3.2.4. Corporate Takeovers

3.3. Creditor Mechanisms

3.3.1. Bond Indenture

3.3.2. Creditor Committees

3.4. Board and Management Mechanisms

3.4.1. Audit Committee

3.4.2. Nominating/Governance Committee

3.4.3. Compensation/Remuneration Committee

3.4.4. Additional Committees

3.5. Employee Mechanisms

3.6. Customer and Supplier Mechanisms

3.7. Government Mechanisms

3.7.1. Laws and Regulations

3.7.2. Corporate Governance Codes

4. Corporate Governance Risks and Benefits

4.1. Operational Risks and Benefits

4.2. Legal, Regulatory, and Reputational Risks and Benefits

4.3. Financial Risks and Benefits

Practice Problems

Solutions

Working Capital and Liquidity

Learning Outcomes

1. Introduction

2. Cash Conversion Cycle

3. Liquidity

3.1. Primary Liquidity Sources

3.2. Secondary Liquidity Sources

3.3. Factors Affecting Liquidity: Drags and Pulls

3.4. Measuring and Evaluating Liquidity

4. Managing Working Capital and Liquidity

4.1. Working Capital Management

4.2. Liquidity and Short-Term Funding

Practice Problems

Solutions

Capital Investments and Capital Allocation

Learning Outcomes

1. Introduction

2. Capital Investments

2.1. Going Concern Projects

2.2. Regulatory Compliance Projects

2.3. Expansion of Existing Business

2.4. New Lines of Business and Other Projects

3. Capital Allocation

3.1. Net Present Value (NPV)

3.2. Internal Rate of Return

3.3. Return on Invested Capital

4. Capital Allocation Principles and Pitfalls

4.1. Capital Allocation Principles

4.2. Capital Allocation Pitfalls

4.2.1. Cognitive Errors in Capital Allocation

4.2.2. Behavioral Biases in Capital Allocation

5. Real Options

Practice Problems

Solutions

Capital Structure

Learning Outcomes

1. Introduction

2. The Cost of Capital

3. Factors Affecting Capital Structure

3.1. Determinants of the Amount and Type of Financing Needed

3.1.1. Capital-Intensive Businesses

3.1.2. “Capital-Light” Businesses

3.1.3. Corporate Life Cycle

3.2. Determinants of the Costs of Debt and Equity

3.2.1. Top-Down Factors

3.2.2. Issuer-Specific Factors

4. Modigliani–Miller Capital Structure Propositions

4.1. Capital Structure Irrelevance (MM Proposition I without Taxes)

4.2. Higher Financial Leverage Raises the Cost of Equity (MM Proposition II without Taxes)

4.3. Firm Value with Taxes (MM Proposition II with Taxes)

4.4. Cost of Capital (MM Proposition II with Taxes)

4.5. Cost of Financial Distress

5. Optimal Capital Structure

5.1. Target Weights and WACC

5.2. Pecking Order Theory and Agency Costs

Practice Problems

Solutions

Business Models

Learning Outcomes

1. Introduction

2. Defining the Business Model

2.1. Business Model Features

2.1.1. The Customers and the Market (“Who”)

2.1.2. Product or Service Offering (“What” and Often “Why”)

2.1.3. Channels (“Where”)

2.1.4. Pricing (“How Much”)

2.2. Pricing and Revenue Models

2.3. The Value Proposition (Who + What + Where + How Much)

2.4. Business Organization and Capabilities

3. Business Model Types

3.1. Conventional Business Models

3.2. Business Model Variations

3.3. Business Model Innovation

3.4. Network Effects and Platform Business Models

Practice Problems

Solutions

Financial Statement Analysis

Introduction to Financial Statement Analysis

Learning Outcomes

1. Introduction

2. Financial Statement Analysis Framework

2.1. Articulate the Purpose and Context of the Analysis

2.2. Collect Data

2.3. Process Data

2.4. Analyze/Interpret the Data

2.5. Develop and Communicate Conclusions and Recommendations

2.6. Follow-Up

3. Scope of Financial Statement Analysis

4. Regulated Sources of Information

4.1. International Organization of Securities Commissions

4.2. US Securities and Exchange Commission

4.3. Capital Markets Regulation in Europe

4.4. Financial Notes and Supplementary Schedules

4.5. Business and Geographic Segment Reporting

4.6. Management Commentary or Management’s Discussion and Analysis

4.7. Auditor’s Reports

5. Comparison of IFRS with Alternative Financial Reporting Systems

5.1. Monitoring Developments in Financial Reporting Standards

5.2. New Products or Types of Transactions

5.3. Evolving Standards and the Role of CFA Institute

6. Other Sources of Information

Practice Problems

Solutions

Analyzing Income Statements

Learning Outcomes

1. Introduction

2. Revenue Recognition

2.1. General Principles

2.2. Accounting Standards for Revenue Recognition

3. Expense Recognition

3.1. General Principles

3.2. Capitalization versus Expensing

3.3. Capitalization of Interest Costs

3.4. Capitalization of Internal Development Costs

3.5. Implications for Financial Analysts: Expense Recognition

4. Non-Recurring Items

4.1. Unusual or Infrequent Items

4.2. Discontinued Operations

4.3. Changes in Accounting Policy

4.4. Changes in Scope and Exchange Rates

5. Earnings per Share

5.1. Simple versus Complex Capital Structure

5.2. Basic EPS

5.3. Diluted EPS: The If-Converted Method

5.4. Diluted EPS When a Company Has Convertible Preferred Stock Outstanding

5.5. Diluted EPS When a Company Has Convertible Debt Outstanding

5.6. Diluted EPS: The Treasury Stock Method

5.7. Other Issues with Diluted EPS and Changes in EPS

5.8. Changes in EPS

6. Income Statement Ratios and Common-Size Analysis

6.1. Common-Size Analysis of the Income Statement

6.2. Income Statement Ratios

Practice Problems

Solutions

Analyzing Balance Sheets

Learning Outcomes

1. Introduction

2. Intangible Assets

2.1. Identifiable Intangibles

3. Goodwill

4. Financial Instruments

5. Non-Current Liabilities

5.1. Long-Term Financial Liabilities

5.2. Deferred Tax Liabilities

6. Ratios and Common-Size Analysis

6.1. Common-Size Analysis of the Balance Sheet

6.2. Some interesting general observations can be made from these data:

6.3. Balance Sheet Ratios

Practice Problems

Solutions

Analyzing Statements of Cash Flows I

Learning Outcomes

1. Introduction

2. Linkages between the Financial Statements

2.1. Primary Financial Statements

2.2. Relationship between Financial Statements

2.3. Linkages Between Current Assets and Current Liabilities

3. The Direct Method for Cash Flows from Operating Activities

3.1. Operating Activities: Direct Method

3.1.1. Cash Received From Customers

3.1.2. Cash Paid to Suppliers

3.1.3. Cash Paid to Employees

3.1.4. Cash Paid for Other Operating Expenses

3.1.5. Cash Paid for Interest

3.1.6. Cash Paid for Income Taxes

4. The Indirect Method for Cash Flows from Operating Activities

4.1. Operating Activities: Indirect Method

5. Conversion from the Indirect to Direct Method

5.1. Method to Convert Cash Flow from Indirect to Direct

6. Cash Flows from Investing Activities

6.1. Cash Flows from Investing Activities

7. Cash Flows from Financing Activities

7.1. Cash Flow from Financing activities: Long-Term Debt and Common Stock

7.2. Computing Dividends Paid

8. Differences in Cash Flow Statements Prepared under US GAAP versus IFRS

Practice Problems

Solutions

Analyzing Statements of Cash Flows II

Learning Outcomes

1. Introduction

2. Evaluating Sources and Uses of Cash

2.1.

2.1.1. Step 1. Evaluate the major sources and uses of cash flow

2.1.2. Step 2. Evaluate the primary determinants of operating cash flow

2.1.3. Step 3. Evaluate the primary determinants of investing cash flow

2.1.4. Step 4. Evaluate the primary determinants of financing cash flow

3. Ratios and Common-Size Analysis

4. Free Cash Flow Measures

5. Cash Flow Statement Analysis: Cash Flow Ratios

Practice Problems

Solutions

Analysis of Inventories

Learning Outcomes

1. Introduction

2. Inventory Valuation

3. The Effects of Inflation and Deflation on Inventories, Costs of Sales, and Gross Margin

4. Presentation and Disclosure

4.1. Presentation and Disclosure

4.2. Inventory Ratios

Practice Problems

Solutions

Analysis of Long-Term Assets

Learning Outcomes

1. Introduction

2. Acquisition of Intangible Assets

2.1. Intangible Assets Purchased in Situations Other Than Business Combinations

2.2. Intangible Assets Developed Internally

2.3. Intangible Assets Acquired in a Business Combination

3. Impairment and Derecognition of Assets

3.1. Impairment of Property, Plant, and Equipment

3.2. Impairment of Intangible Assets with a Finite Life

3.3. Impairment of Intangibles with Indefinite Lives

3.4. Impairment of Long-Lived Assets Held for Sale

3.5. Reversals of Impairments of Long-Lived Assets

3.6. Derecognition

3.6.1. Sale of Long-Lived Assets

3.6.2. Long-Lived Assets Disposed of Other Than by a Sale

4. Presentation and Disclosure

5. Using Disclosures in Analysis

Practice Problems

Solutions

Topics in Long-Term Liabilities and Equity

Learning Outcomes

1. Introduction

2. Leases

2.1. Requirements for Lease Accounting

2.2. Examples of Leases

2.3. Advantages of Leasing

2.4. Lease Classification as Finance or Operating

2.5. Financial Reporting of Leases

2.6. Lessee Accounting—IFRS

2.7. Lessee Accounting—US GAAP

2.8. Lessor Accounting

3. Financial Reporting for Postemployment and Share-Based Compensation Plans

3.1. Employee Compensation

3.2. Deferred Compensation

3.3. Defined-Benefit Pension Plans

3.4. Accounting for Defined-Benefit Plans under IFRS

3.5. Accounting for Defined-Benefit Plan under US GAAP

3.6. Pension-Related Disclosures

3.7. Share-Based Compensation

3.8. Stock Grants

3.9. Stock Options

3.10. Accounting for Stock Options

3.11. Other Types of Share-Based Compensation

4. Presentation and Disclosure

4.1. Presentation and Disclosure of Leases

4.2. Lessee Disclosure

4.3. Lessor Disclosure

4.4. Presentation and Disclosure of Postemployment Plans

4.5. Presentation and Disclosure of Share-Based Compensation

Practice Problems

Solutions

Glossary

2024 CFA Program Curriculum Level 1 Volume 3: Financial Statement Analysis, Equity Investments

Title Page

Table of Contents

How to Use the CFA Program Curriculum

Errata

Designing Your Personal Study Program

CFA Institute Learning Ecosystem (LES)

Prerequisite Knowledge

Feedback

Financial Statement Analysis

Analysis of Income Taxes

Learning Outcomes

1. Introduction

2. Differences between Accounting Profit and Taxable Income

2.1. Taxable Temporary Differences

2.2. Deductible Temporary Differences

2.3. Taxable and Deductible Temporary Differences

2.4. Permanent Differences

2.5. Tax Expense

3. Deferred Tax Assets and Liabilities

3.1. Realizability of Deferred Tax Assets

4. Corporate Income Tax Rates

5. Presentation and Disclosure

Practice Problems

Solutions

Financial Reporting Quality

Learning Outcomes

1. Introduction

2. Conceptual Overview

2.1. Conceptual Overview

3. GAAP, Decision Useful Financial Reporting

3.1. GAAP, Decision-Useful, but Sustainable?

4. Biased Accounting Choices

4.1. Within GAAP, but “Earnings Management”

5. Departures from GAAP

6. Differentiate between Conservative and Aggressive Accounting

6.1. Conservatism in Accounting Standards

6.2. Bias in the Application of Accounting Standards

7. Context for Assessing Financial Reporting Quality

7.1. Motivations

7.2. Conditions Conducive to Issuing Low-Quality Financial Reports

8. Mechanisms That Discipline Financial Reporting Quality

8.1. Market Regulatory Authorities

8.2. Auditors

8.3. Private Contracting

9. Detection of Financial Reporting Quality Issues: Introduction and Presentation Choices

9.1. Presentation Choices

10. Accounting Choices and Estimates

10.1. How Accounting Choices and Estimates Affect Earnings and Balance Sheets

11. Accounting Choices That Affect the Cash Flow Statement

12. Accounting Choices that Affect Financial Reporting

13. Warning Signs

13.1. Pay Attention to Revenue

13.2. Pay Attention to Signals from Inventories

13.3. Pay Attention to Capitalization Policies and Deferred Costs

13.4. Pay Attention to the Relationship between Cash Flow and Net Income

13.5. Look for Other Potential Warnings Signs

13.5.1. Company Culture

13.5.2. Restructuring or Impairment Charges

13.5.3. Management Has a Merger and Acquisition Orientation

References

Practice Problems

Solutions

Financial Analysis Techniques

Learning Outcomes

1. Introduction

2. The Financial Analysis Process

2.1. The Objectives of the Financial Analysis Process

2.2. Distinguishing between Computations and Analysis

3. Analytical Tools and Techniques

4. Financial Ratio Analysis

4.1. The Universe of Ratios

4.2. Value, Purposes, and Limitations of Ratio Analysis

4.3. Sources of Ratios

5. Common Size Balance Sheets and Income Statements

5.1. Common-Size Analysis of the Income Statement

6. Cross-Sectional, Trend Analysis, and Relationships in Financial Statements

6.1. Trend Analysis

6.2. Relationships Among Financial Statements

7. The Use of Graphs and Regression Analysis

7.1. Regression Analysis

8. Common Ratio Categories, Interpretation, and Context

8.1. Interpretation and Context

9. Activity Ratios

9.1. Calculation of Activity Ratios

9.2. Interpretation of Activity Ratios

9.2.1. Inventory Turnover and DOH

9.2.2. Receivables Turnover and DSO

9.2.3. Payables Turnover and the Number of Days of Payables

9.2.4. Working Capital Turnover

9.2.5. Fixed Asset Turnover

9.2.6. Total Asset Turnover

10. Liquidity Ratios

10.1. Calculation of Liquidity Ratios

10.2. Interpretation of Liquidity Ratios

10.2.1. Current Ratio

10.2.2. Quick Ratio

10.2.3. Cash Ratio

10.2.4. Defensive Interval Ratio

10.2.5. Cash Conversion Cycle (Net Operating Cycle)

11. Solvency Ratios

11.1. Calculation of Solvency Ratios

11.2. Interpretation of Solvency Ratios

11.2.1. Debt-to-Assets Ratio

11.2.2. Debt-to-Capital Ratio

11.2.3. Debt-to-Equity Ratio

11.2.4. Financial Leverage Ratio

11.2.5. Debt-to-EBITDA Ratio

11.2.6. Interest Coverage

11.2.7. Fixed Charge Coverage

12. Profitability Ratios

12.1. Calculation of Profitability Ratios

12.2. Interpretation of Profitability Ratios

12.2.1. Gross Profit Margin

12.2.2. Operating Profit Margin

12.2.3. Pretax Margin

12.2.4. Net Profit Margin

12.2.5. ROA

12.2.6. Return on Invested Capital

12.2.7. ROE

13. Integrated Financial Ratio Analysis

13.1. The Overall Ratio Picture: Examples

14. DuPont Analysis—The Decomposition of ROE

15. Industry-Specific Financial Ratios

16. Model Building and Forecasting

References

Practice Problems

Solutions

Introduction to Financial Statement Modeling

Learning Outcomes

1. Introduction

2. Building a Financial Statement Model

2.1. Company Overview

2.2. Revenue Forecast

2.3. COGS

2.4. SG&A Expenses and Other Operating Expenses

2.5. Operating Profit by Segment

2.6. Non-Operating Items

2.7. Corporate Income Tax Forecast

2.8. Shares Outstanding

2.9. Pro Forma Income Statement

2.10. Pro Forma Statement of Cash Flows

2.11. Capital Investments and Depreciation Forecasts

2.12. Working Capital Forecasts

2.13. Forecasted Cash Flow Statement

2.14. Forecasted Balance Sheet

2.15. Valuation Model Inputs

3. Behavioral Finance and Analyst Forecasts

3.1. Overconfidence in Forecasting

3.2. Illusion of Control

3.3. Conservatism Bias

3.4. Representativeness Bias

3.5. Confirmation Bias

4. The Impact of Competitive Factors in Prices and Costs

4.1. Cognac Industry Overview

5. Modeling Inflation and Deflation

5.1. Sales Projections with Inflation and Deflation

5.1.1. Industry Sales and Inflation or Deflation

5.1.2. Company Sales and Inflation or Deflation

5.2. Cost Projections with Inflation and Deflation

5.2.1. Industry Costs and Inflation or Deflation

5.2.2. Company Costs and Inflation or Deflation

6. The Forecast Horizon and Long-Term Forecasting

6.1. Case Study: Estimating Normalized Revenue

References

Practice Problems

Solutions

Equity Investments

Market Organization and Structure

Learning Outcomes

1. Introduction

2. The Functions of the Financial System

2.1. Helping People Achieve Their Purposes in Using the Financial System

2.1.1. Saving

2.1.2. Borrowing

2.1.3. Raising Equity Capital

2.1.4. Managing Risks

2.1.5. Exchanging Assets for Immediate Delivery (Spot Market Trading)

2.1.6. Information-Motivated Trading

2.1.7. Summary

2.2. Determining Rates of Return

2.3. Capital Allocation Efficiency

3. Assets and Contracts

3.1. Classifications of Assets and Markets

4. Securities

4.1. Fixed Income

4.2. Equities

4.3. Pooled Investments

5. Currencies, Commodities, and Real Assets

5.1. Commodities

5.2. Real Assets

6. Contracts

6.1. Forward Contracts

6.2. Futures Contracts

6.3. Swap Contracts

6.4. Option Contracts

6.5. Other Contracts

7. Financial Intermediaries

7.1. Brokers, Exchanges, and Alternative Trading Systems

7.2. Dealers

7.3. Arbitrageurs

8. Securitizers, Depository Institutions and Insurance Companies

8.1. Depository Institutions and Other Financial Corporations

8.2. Insurance Companies

9. Settlement and Custodial Services and Summary

9.1. Summary

10. Positions and Short Positions

10.1. Short Positions

11. Leveraged Positions

12. Orders and Execution Instructions

12.1. Execution Instructions

13. Validity Instructions and Clearing Instructions

13.1. Stop Orders

13.2. Clearing Instructions

14. Primary Security Markets

14.1. Public Offerings

14.2. Private Placements and Other Primary Market Transactions

14.3. Importance of Secondary Markets to Primary Markets

15. Secondary Security Market and Contract Market Structures

15.1. Trading Sessions

15.2. Execution Mechanisms

15.2.1. Quote-Driven Markets

15.2.2. Order-Driven Markets

15.2.2.1. Order Matching Rules

15.2.2.2. Trade Pricing Rules

15.2.3. Brokered Markets

15.3. Market Information Systems

16. Well-functioning Financial Systems

17. Market Regulation

18. Summary

Practice Problems

Solutions

Security Market Indexes

Learning Outcomes

1. Introduction

2. Index Definition and Calculations of Value and Returns

2.1. Calculation of Single-Period Returns

2.2. Calculation of Index Values over Multiple Time Periods

3. Index Construction

3.1. Target Market and Security Selection

3.2. Index Weighting

3.2.1. Price Weighting

3.2.2. Equal Weighting

3.2.3. Market-Capitalization Weighting

3.2.3.1. Float-Adjusted Market-Capitalization Weighting

3.2.4. Fundamental Weighting

4. Index Management: Rebalancing and Reconstitution

4.1. Rebalancing

4.2. Reconstitution

5. Uses of Market Indexes

5.1. Gauges of Market Sentiment

5.2. Proxies for Measuring and Modeling Returns, Systematic Risk, and Risk-Adjusted Performance

5.3. Proxies for Asset Classes in Asset Allocation Models

5.4. Benchmarks for Actively Managed Portfolios

5.5. Model Portfolios for Investment Products

6. Equity indexes

6.1. Broad Market Indexes

6.2. Multi-Market Indexes

6.2.1. Fundamental Weighting in Multi-Market Indexes

6.3. Sector Indexes

6.4. Style Indexes

6.4.1. Market Capitalization

6.4.2. Value/Growth Classification

6.4.3. Market Capitalization and Value/Growth Classification

7. Fixed-income indexes

7.1. Construction

7.2. Types of Fixed-Income Indexes

8. Indexes for Alternative Investments

8.1. Commodity Indexes

8.2. Real Estate Investment Trust Indexes

8.3. Hedge Fund Indexes

9. Summary

Practice Problems

Solutions

Market Efficiency

Learning Outcomes

1. Introduction

2. The Concept of Market Efficiency

2.1. The Description of Efficient Markets

2.2. Market Value versus Intrinsic Value

3. Factors Affecting Market Efficiency Including Trading Costs

3.1. Market Participants

3.2. Information Availability and Financial Disclosure

3.3. Limits to Trading

3.4. Transaction Costs and Information-Acquisition Costs

4. Forms of Market Efficiency

4.1. Weak Form

4.2. Semi-Strong Form

4.3. Strong Form

5. Implications of the Efficient Market Hypothesis

5.1. Fundamental Analysis

5.2. Technical Analysis

5.3. Portfolio Management

6. Market Pricing Anomalies – Time Series and Cross-Sectional

6.1. Time-Series Anomalies

6.1.1. Calendar Anomalies

6.1.2. Momentum and Overreaction Anomalies

6.2. Cross-Sectional Anomalies

6.2.1. Size Effect

6.2.2. Value Effect

7. Other Anomalies, Implications of Market Pricing Anomalies

7.1. Closed-End Investment Fund Discounts

7.2. Earnings Surprise

7.3. Initial Public Offerings (IPOs)

7.4. Predictability of Returns Based on Prior Information

7.5. Implications for Investment Strategies

8. Behavioral Finance

8.1. Loss Aversion

8.2. Herding

8.3. Overconfidence

8.4. Information Cascades

8.5. Other Behavioral Biases

8.6. Behavioral Finance and Investors

8.7. Behavioral Finance and Efficient Markets

9. Summary

References

Practice Problems

Solutions

Overview of Equity Securities

Learning Outcomes

1. Importance of Equity Securities

1.1. Equity Securities in Global Financial Markets

2. Characteristics of Equity Securities

2.1. Common Shares

2.2. Preference Shares

3. Private Versus Public Equity Securities

4. Non-Domestic Equity Securities

4.1. Direct Investing

4.2. Depository Receipts

4.2.1. Global Depository Receipts

4.2.2. American Depository Receipts

4.2.3. Global Registered Share

4.2.4. Basket of Listed Depository Receipts

5. Risk and Return Characteristics

5.1. Return Characteristics of Equity Securities

5.2. Risk of Equity Securities

6. Equity and Company Value

6.1. Accounting Return on Equity

6.2. The Cost of Equity and Investors’ Required Rates of Return

7. Summary

References

Practice Problems

Solutions

Company Analysis: Past and Present

Learning Outcomes

1. Introduction

2. Company Research Reports

3. Determining the Business Model

4. Revenue Analysis

4.1. Revenue Drivers

4.2. Pricing Power

4.3. Top-Down Revenue Analysis

5. Operating Profitability and Working Capital Analysis

5.1. Operating Costs and Their Classification

5.2. Behavior with Output: Fixed and Variable Costs

5.3. Natural and Functional Operating Cost Classifications and Measures of Operating Profitability

5.4. Working Capital

6. Capital Investments and Capital Structure

6.1. Sources and Uses of Capital

6.2. Evaluating Capital Investments and Capital Structure

Practice Problems

Solutions

Industry and Competitive Analysis

Learning Outcomes

1. Introduction

2. Uses of Industry Analysis

2.1. Why Analyze an Industry?

2.2. Improve Forecasts

2.3. Identify Investment Opportunities

2.4. Industry and Competitive Analysis Steps

3. Industry Classification

3.1. Third-Party Industry Classification Schemes

3.2. Limitations of Third-Party Industry Classification Schemes

3.3. Alternative Methods of Grouping Companies

4. Industry Survey

4.1. Industry Size and Historical Growth Rate

4.2. Characterizing Industry Growth

4.3. Industry Profitability Measures

4.4. Market Share Trends and Major Players

5. Industry Structure and External Influences

5.1. Assessing the Five Forces: A Checklist Approach

5.1.1. Assessing the Threat of New Entrants

5.1.2. Assessing the Threat of Substitutes

5.1.3. Assessing the Bargaining Power of Customers

5.1.4. Assessing the Bargaining Power of Suppliers

5.1.5. Assessing Rivalry among Existing Competitors

5.2. External Influences on Industry Growth

5.2.1. Political Influences

5.2.2. Economic Influences

5.2.3. Social Influences

5.2.4. Technological Influences

5.2.5. Legal Influences

5.2.6. Environmental Influences

6. Competitive Positioning

References

Practice Problems

Solutions

Company Analysis: Forecasting

Learning Outcomes

1. Introduction

2. Forecast Objects, Principles, and Approaches

2.1. What to Forecast?

2.2. Focus on Objects That Are Regularly Disclosed

2.3. Forecast Approaches

2.3.1. Historical Results: Assume Past is Precedent

2.3.2. Historical Base Rates and Convergence

2.3.3. Management guidance

2.3.4. Analyst’s discretionary forecast

2.4. Selecting a Forecast Horizon

3. Forecasting Revenues

3.1. Forecast Objects for Revenues

3.1.1. Separating Recurring and Non-Recurring Revenue or Revenue Growth

3.2. Forecast Approaches for Revenues

4. Forecasting Operating Expenses and Working Capital

4.1. Cost of Sales and Gross Margins

4.2. SG&A Expenses

4.3. Working Capital Forecasts

5. Forecasting Capital Investments and Capital Structure

6. Scenario Analysis

References

Practice Problems

Solutions

Equity Valuation: Concepts and Basic Tools

Learning Outcomes

1. Introduction

2. Estimated Value and Market Price

3. Categories of Equity Valuation Models

4. Background for the Dividend Discount Model

4.1. Dividends: Background for the Dividend Discount Model

5. Dividend Discount Model (DDM) and Free-Cash-Flow-to-Equity Model (FCFE)

6. Preferred Stock Valuation

7. The Gordon Growth Model

8. Multistage Dividend Discount Models

9. Multipler Models and Relationship Among Price Multiples, Present Value Models, and Fundamentals

9.1. Relationships among Price Multiples, Present Value Models, and Fundamentals

10. Method of Comparables and Valuation Based on Price Multiples

10.1. Illustration of a Valuation Based on Price Multiples

11. Enterprise Value

12. Asset-Based Valuation

13. Summary

References

Practice Problems

Solutions

Glossary

2024 CFA Program Curriculum Level 1 Volume 4: Fixed Income

Title Page

Table of Contents

How to Use the CFA Program Curriculum

Errata

Designing Your Personal Study Program

CFA Institute Learning Ecosystem (LES)

Prerequisite Knowledge

Feedback

Fixed Income

Fixed-Income Instrument Features

Learning Outcomes

1. Introduction

2. Features of Fixed-Income Securities

2.1. Issuer

2.2. Maturity

2.3. Principal (Par or Face Value)

2.4. Coupon Rate and Frequency

2.5. Seniority

2.6. Contingency Provisions

2.7. Yield Measures

2.8. Yield Curves

3. Bond Indentures and Covenants

3.1. Bond Indentures

3.2. Sources of Repayment

3.3. Bond Covenants

Practice Problems

Solutions

Fixed-Income Cash Flows and Types

Learning Outcomes

1. Introduction

2. Fixed-Income Cash Flow Structures

2.1. Amortizing Debt

2.2. Variable Interest Debt

2.3. Zero-Coupon Structures

2.4. Deferred Coupon Structures

3. Fixed-Income Contingency Provisions

3.1. Callable Bonds

3.2. Putable Bonds

3.3. Convertible Bonds

4. Legal, Regulatory, and Tax Considerations

4.1. Legal and Regulatory Considerations

4.2. Tax Considerations

Practice Problems

Solutions

Fixed-Income Issuance and Trading

Learning Outcomes

1. Introduction

2. Fixed-Income Segments, Issuers, and Investors

3. Fixed-Income Indexes

4. Primary and Secondary Fixed-Income Markets

4.1. Primary Fixed-Income Markets

4.2. Secondary Fixed-Income Markets

Practice Problems

Solutions

Fixed-Income Markets for Corporate Issuers

Learning Outcomes

1. Introduction

2. Short-Term Funding Alternatives

2.1. External Loan Financing

2.1.1. Lines of Credit

2.1.2. Secured Loans and Factoring

2.2. External, Security-Based Financing

2.3. Short-Term Funding Alternatives for Financial Institutions

2.3.1. Deposits

2.3.2. Interbank Market

2.3.3. Commercial Paper

3. Repurchase Agreements

3.1. Repurchase Agreement Applications and Benefits

3.2. Risks Associated with Repurchase Agreements

4. Long-Term Corporate Debt

4.1. Similarities between Long-Term Investment-Grade and High-Yield Issuance

4.2. Differences between IG and HY Issuance

Practice Problems

Solutions

Fixed-Income Markets for Government Issuers

Learning Outcomes

1. Introduction

2. Sovereign Debt

3. Sovereign Debt Issuance and Trading

4. Non-Sovereign, Quasi-Government, and Supranational Agency Debt

4.1. Government Agencies

4.2. Local and Regional Government Authorities

4.3. Supranational Organizations

Practice Problems

Solutions

Fixed-Income Bond Valuation: Prices and Yields

Learning Outcomes

1. Introduction

2. Bond Pricing and the Time Value of Money

2.1. Bond Pricing with a Market Discount Rate

2.2. Yield-to-Maturity

2.3. Flat Price, Accrued Interest, and the Full Price

3. Relationships between Bond Prices and Bond Features

3.1. Inverse Relationship

3.2. Coupon Effect

3.3. Maturity Effect

3.4. Constant-Yield Price Trajectory

3.5. Convexity Effect

4. Matrix Pricing

4.1. Matrix Pricing Process

Practice Problems

Solutions

Yield and Yield Spread Measures for Fixed-Rate Bonds

Learning Outcomes

1. Introduction

2. Periodicity and Annualized Yields

3. Other Yield Measures, Conventions, and Accounting for Embedded Options

3.1. Other Yield Measures and Conventions

3.2. Bonds with Embedded Options

4. Yield Spread Measures for Fixed-Rate Bonds and Matrix Pricing

4.1. Yield Spreads over Benchmark Rates

4.2. Yield Spreads over the Benchmark Yield Curve

Practice Problems

Solutions

Yield and Yield Spread Measures for Floating-Rate Instruments

Learning Outcomes

1. Introduction

2. Yield and Yield Spread Measures for Floating-Rate Notes

2.1. Yield and Yield Spread Measures for Floating-Rate Instruments

3. Yield Measures for Money Market Instruments

Practice Problems

Solutions

The Term Structure of Interest Rates: Spot, Par, and Forward Curves

Learning Outcomes

1. Introduction

2. Maturity Structure of Interest Rates and Spot Rates

2.1. Maturity Structure of Interest Rates

2.2. Bond Pricing Using Spot Rates

3. Par and Forward Rates

3.1. Par Rates from Spot Rates

3.2. Forward Rates from Spot Rates

3.3. Spot Rates from Forward Rates and Bond Pricing with Forward Rates

4. Spot, Par, and Forward Yield Curves and Interpreting Their Relationship

Practice Problems

Solutions

Interest Rate Risk and Return

Learning Outcomes

1. Introduction

2. Sources of Return from Investing in a Fixed-Rate Bond

3. Investment Horizon and Interest Rate Risk

4. Macaulay Duration

Practice Problems

Solutions

Yield-Based Bond Duration Measures and Properties

Learning Outcomes

1. Introduction

2. Modified Duration

2.1. Approximate Modified Duration

3. Money Duration and Price Value of a Basis Point

3.1. Yield Duration of Zero-Coupon and Perpetual Bonds

3.2. Duration of Floating-Rate Notes and Loans

4. Properties of Duration

Practice Problems

Solutions

Yield-Based Bond Convexity and Portfolio Properties

Learning Outcomes

1. Introduction

2. Bond Convexity and Convexity Adjustment

3. Bond Risk and Return Using Duration and Convexity

4. Portfolio Duration and Convexity

Practice Problems

Solutions

Curve-Based and Empirical Fixed-Income Risk Measures

Learning Outcomes

1. Introduction

2. Curve-Based Interest Rate Risk Measures

3. Bond Risk and Return Using Curve-Based Duration and Convexity

4. Key Rate Duration as a Measure of Yield Curve Risk

5. Empirical Duration

Practice Problems

Solutions

Credit Risk

Learning Outcomes

1. Introduction

2. Sources of Credit Risk

2.1. Sources of Credit Risk

2.2. Measuring Credit Risk

3. Credit Rating Agencies and Credit Ratings

3.1. Credit Ratings

3.2. Credit Rating Considerations

4. Factors Impacting Yield Spreads

4.1. Macroeconomic Factors

4.2. Market Factors

4.3. Issuer-Specific Factors

4.4. The Price Impact of Spread Changes

Practice Problems

Solutions

Credit Analysis for Government Issuers

Learning Outcomes

1. Introduction

2. Sovereign Credit Analysis

2.1. Qualitative Factors

2.2. Quantitative Factors

3. Non-Sovereign Credit Risk

3.1. Non-Sovereign Government Debt

3.2. Agencies

3.3. Government Sector Banks and Development Financing Institutions

3.4. Supranational Issuers

3.5. Regional Government Issuers

3.5.1. General Obligation Bonds

3.5.2. Revenue Bonds

Practice Problems

Solutions

Credit Analysis for Corporate Issuers

Learning Outcomes

1. Introduction

2. Assessing Corporate Creditworthiness

2.1. Qualitative Factors

2.1.1. Quantitative Factors

3. Financial Ratios in Corporate Credit Analysis

4. Seniority Rankings, Recovery Rates, and Credit Ratings

4.1. Seniority Rankings

4.2. Secured versus Unsecured Debt

4.3. Recovery Rates

4.4. Issuer and Issue Ratings

Practice Problems

Solutions

Fixed-Income Securitization

Learning Outcomes

1. Introduction

2. The Benefits of Securitization

2.1. Benefits to Issuers

2.2. Benefits to Investors

2.3. Benefits to Economies and Financial Markets

3. The Securitization Process

3.1. An Example of a Securitization

3.2. Parties to a Securitization

3.3. The Role of the SPE

Practice Problems

Solutions

Asset-Backed Security (ABS) Instrument and Market Features

Learning Outcomes

1. Introduction

2. Covered Bonds

3. ABS Structures to Address Credit Risk

3.1. Credit Enhancement

3.2. Credit Tranching

4. Non-Mortgage Asset-Backed Securities

4.1. Credit Card Receivable ABS

4.2. Solar ABS

5. Collateralized Debt Obligations

5.1. Generic CLO Structure

Practice Problems

Solutions

Mortgage-Backed Security (MBS) Instrument and Market Features

Learning Outcomes

1. Introduction

2. Time Tranching

2.1. Prepayment Risk

3. Mortgage Loans and Their Characteristic Features

3.1. Agency and Non-Agency RMBS

3.2. Mortgage Contingency Features

4. Residential Mortgage-Backed Securities (RMBS)

4.1. Mortgage Pass-Through Securities

4.2. Collateralized Mortgage Obligations (CMOs)

4.2.1. Sequential-Pay CMO

4.3. Other CMO Structures

5. Commercial Mortgage-Backed Securities (CMBS)

5.1. CMBS Structure

5.1.1. Call Protection

5.1.2. Balloon Maturity Provision

5.2. CMBS Risks

Practice Problems

Solutions

Glossary

2024 CFA Program Curriculum Level 1 Volume 5: Derivatives, Alternative Investments

Title Page

Table of Contents

How to Use the CFA Program Curriculum

Errata

Designing Your Personal Study Program

CFA Institute Learning Ecosystem (LES)

Prerequisite Knowledge

Feedback

Derivatives

Derivative Instrument and Derivative Market Features

Learning Outcomes

1. Introduction

2. Derivative Features

2.1. Definition and Features of a Derivative

3. Derivative Underlyings

3.1. Equities

3.2. Fixed-Income Instruments

3.3. Currencies

3.4. Commodities

3.5. Credit

3.6. Other

3.7. Investor Scenarios

3.7.1. Scenario 1: Hightest Capital

3.7.2. Scenario 2: Esterr Inc.

4. Derivative Markets

4.1. Over-the-Counter (OTC) Derivative Markets

4.2. Exchange-Traded Derivative (ETD) Markets

4.3. Central Clearing

4.4. Investor Scenarios

4.4.1. Scenario 1. Hightest Capital.

4.4.2. Scenario 2. Esterr Inc.

Practice Problems

Solutions

Forward Commitment and Contingent Claim Features and Instruments

Learning Outcomes

1. Introduction

2. Forwards, Futures, and Swaps

3. Futures

4. Swaps

5. Options

5.1. Scenario 1: Transact (ST > X)

5.2. Scenario 2: Do Not Transact (ST < X)

6. Credit Derivatives

7. Forward Commitments vs. Contingent Claims

Practice Problems

Solutions

Derivative Benefits, Risks, and Issuer and Investor Uses

Learning Outcomes

1. Introduction

2. Derivative Benefits

3. Derivative Risks

4. Issuer Use of Derivatives

5. Investor Use of Derivatives

Practice Problems

Solutions

Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives

Learning Outcomes

1. Introduction

2. Arbitrage

3. Replication

4. Costs and Benefits Associated with Owning the Underlying

Pricing and Valuation of Forward Contracts and for an Underlying with Varying Maturities

Learning Outcomes

1. Introduction

2. Pricing and Valuation of Forward Contracts

2.1. Pricing versus Valuation of Forward Contracts

2.1.1. Pricing and Valuation of Forward Contracts at Initiation

2.1.2. Pricing and Valuation of Forward Contracts at Maturity

2.1.3. Pricing and Valuation of Forward Contracts during the Life of the Contract

2.1.4. Pricing and Valuation of Forward Contracts with Additional Costs or Benefits

3. Pricing and Valuation of Interest Rate Forward Contracts

3.1. Interest Rate Forward Contracts

3.1.1. Spot Rates and Discount Factors

3.1.2. Forward Rates

3.1.3. Forward Rate Agreements (FRAs)

Practice Problems

Solutions

Pricing and Valuation of Futures Contracts

Learning Outcomes

1. Introduction

2. Pricing of Futures Contracts at Inception

3. MTM Valuation: Forwards versus Futures

4. Interest Rate Futures versus Forward Contracts

5. Forward and Futures Price Differences

6. Interest Rate Forward and Futures Price Differences

7. Effect of Central Clearing of OTC Derivatives

Practice Problems

Solutions

Pricing and Valuation of Interest Rates and Other Swaps

Learning Outcomes

1. Introduction

2. Swaps vs. Forwards

3. Swap Values and Prices

Practice Problems

Solutions

Pricing and Valuation of Options

Learning Outcomes

1. Introduction

2. Option Value relative to the Underlying Spot Price

3. Option Exercise Value

4. Option Moneyness

5. Option Time Value

6. Arbitrage

7. Replication

8. Factors Affecting Option Value

8.1. Value of the Underlying

8.2. Exercise Price

8.3. Time to Expiration

8.4. Risk-Free Interest Rate

8.5. Volatility of the Underlying

8.6. Income or Cost Related to Owning Underlying Asset

Practice Problems

Solutions

Option Replication Using Put–Call Parity

Learning Outcomes

1. Introduction

2. Put–Call Parity

3. Option Strategies Based on Put–Call Parity

4. Put–Call Forward Parity and Option Applications

5. Put–Call Forward Parity

6. Option Put–Call Parity Applications: Firm Value

Practice Problems

Solutions

Valuing a Derivative Using a One-Period Binomial Model

Learning Outcomes

1. Introduction

2. Binomial Valuation

3. The Binomial Model

4. Pricing a European Call Option

5. Risk Neutrality

Practice Problems

Solutions

Alternative Investments

Alternative Investment Features, Methods, and Structures

Learning Outcomes

1. Introduction

2. Alternative Investment Features

2.1. Alternative Investments: Features and Categories

2.2. Private Capital

2.3. Real Assets

2.4. Hedge Funds

3. Alternative Investment Methods

3.1. Alternative Investment Methods

3.2. Fund Investment

3.3. Co-Investment

3.4. Direct Investment

4. Alternative Investment Structures

4.1. Alternative Investment Ownership and Compensation Structures

4.2. Ownership Structures

4.3. Compensation Structures

Practice Problems

Solutions

Alternative Investment Performance and Returns

Learning Outcomes

1. Introduction

2. Alternative Investment Performance

2.1. Alternative Investment Performance Appraisal

2.2. Comparability with Traditional Asset Classes

2.3. Performance Appraisal and Alternative Investment Features

2.3.1. Investment Life Cycle

2.3.2. Use of Borrowed Funds

2.3.3. Valuation

2.3.4. Fees

3. Alternative Investment Returns

3.1. Alternative Investment Returns

3.1.1. Custom Fee Arrangements

3.2. Alternative Investment Return Calculations

3.3. Relative Alternative Investment Returns and Survivorship Bias

Practice Problems

Solutions

Investments in Private Capital: Equity and Debt

Learning Outcomes

1. Introduction

2. Private Equity Investment Characteristics

2.1. Private Equity Investment Categories

2.2. Private Equity Exit Strategies

2.2.1. Trade Sale

2.2.2. Public Listing

2.2.3. Other Exit Strategies

2.3. Risk–Return from Private Equity Investments

3. Private Debt Investment Characteristics

3.1. Private Debt Categories

3.2. Risk–Return of Private Debt

4. Diversification Benefits of Private Capital

Practice Problems

Solutions

Real Estate and Infrastructure

Learning Outcomes

1. Introduction

2. Real Estate Features

2.1. Real Estate Investments

2.2. Real Estate Investment Structures

2.2.1. Direct Real Estate Investment

2.2.2. Indirect Real Estate Investment

3. Real Estate Investment Characteristics

3.1. Source of Returns

3.2. Real Estate Investment Diversification Benefits

4. Infrastructure Investment Features

4.1. Infrastructure Investments

4.1.1. Categories of Infrastructure Investments

4.1.2. Stages of Infrastructure Development

4.1.3. Forms of Infrastructure Investment

5. Infrastructure Investment Characteristics

5.1. Infrastructure Diversification Benefits

Practice Problems

Solutions

Natural Resources

Learning Outcomes

1. Introduction

2. Natural Resources Investment Features

2.1. Land Investments vs. Real Estate

2.2. Features and Forms of Farmland and Timberland Investment

3. Commodity Investment Forms

3.1. Commodity Investment Features

3.2. Distinguishing Characteristics of Commodity Investments

3.3. Basics of Commodity Pricing

4. Natural Resource Investment Risk, Return, and Diversification

4.1. Commodities

4.2. Farmland and Timberland

4.3. Inflation Hedging and Diversification Benefits of Natural Resource Investments

4.3.1. Hedge against Inflation

4.3.2. Portfolio Diversification

Practice Problems

Solutions

Hedge Funds

Learning Outcomes

1. Introduction

2. Hedge Fund Investment Features

2.1. Equity Hedge Fund Strategies

2.2. Event-Driven Strategies

2.3. Relative Value Strategies

2.4. Opportunistic Strategies

2.5. Distinguishing Characteristics of Hedge Fund Investments

3. Hedge Fund Investment Forms

3.1. Direct Hedge Fund Investment Forms

3.2. Indirect Hedge Fund Investment Forms

4. Hedge Fund Investment Risk, Return, and Diversification

4.1. Hedge Fund Investment Risks and Returns

4.2. Diversification Benefits of Hedge Fund Investments

Practice Problems

Solutions

Introduction to Digital Assets

Learning Outcomes

1. Introduction

2. Distributed Ledger Technology

2.1. Proof of Work vs. Proof of Stake

2.1.1. The Proof of Work (PoW) Protocol

2.1.2. The Proof of Stake (PoS) Protocol

2.2. Permissioned and Permissionless Networks

2.3. Types of Digital Assets

2.3.1. Cryptocurrencies

2.3.2. Tokens

3. Digital Asset Investment Features

3.1. Distinguishing Characteristics of Digital Assets

3.2. Investible Digital Assets

3.2.1. Altcoins

3.2.2. Stablecoins

3.2.3. Meme Coins

4. Digital Asset Investment Forms

4.1. Direct Digital Asset Investment Forms

4.2. Indirect Digital Asset Investment Forms

4.3. Digital Forms of Investment for Non-Digital Assets

5. Digital Asset Investment Risk, Return, and Diversification

5.1. Digital Asset Investment Risks and Returns

5.2. Diversification Benefits of Digital Asset Investments

Practice Problems

Solutions

Glossary

2024 CFA Program Curriculum Level 1 Volume 6: Portfolio Management, Ethical and Professional Standards

Title Page

Table of Contents

How to Use the CFA Program Curriculum

Errata

Designing Your Personal Study Program

CFA Institute Learning Ecosystem (LES)

Prerequisite Knowledge

Feedback

Portfolio Management

Portfolio Management: An Overview

Learning Outcomes

1. Introduction

2. Portfolio Perspective: Diversification and Risk Reduction

2.1. Historical Example of Portfolio Diversification: Avoiding Disaster

2.2. Portfolios: Reduce Risk

3. Portfolio Perspective: Risk-Return Trade-off, Downside Protection, Modern Portfolio Theory

3.1. Historical Portfolio Example: Not Necessarily Downside Protection

3.2. Portfolios: Modern Portfolio Theory

4. Steps in the Portfolio Management Process

4.1. Step One: The Planning Step

4.2. Step Two: The Execution Step

4.2.1. Asset Allocation

4.2.2. Security Analysis

4.2.3. Portfolio Construction

4.3. Step Three: The Feedback Step

4.3.1. Portfolio Monitoring and Rebalancing

4.3.2. Performance Evaluation and Reporting

5. Types of Investors

5.1. Individual Investors

5.2. Institutional Investors

5.2.1. Defined Benefit Pension Plans

5.2.2. Endowments and Foundations

5.2.3. Banks

5.2.4. Insurance Companies

5.2.5. Sovereign Wealth Funds

6. The Asset Management Industry

6.1. Active versus Passive Management

6.2. Traditional versus Alternative Asset Managers

6.3. Ownership Structure

6.4. Asset Management Industry Trends

6.4.1. Growth of Passive Investing

6.4.2. Use of “Big Data” in the Investment Process

6.4.3. Robo-Advisers: An Expanding Wealth Management Channel

7. Pooled Interest – Mutual Funds

7.1. Mutual Funds

8. Pooled Interest – Type of Mutual Funds

8.1. Money Market Funds

8.2. Bond Mutual Funds

8.3. Stock Mutual Funds

8.4. Hybrid/Balanced Funds

9. Pooled Interest – Other Investment Products

9.1. Exchange-Traded Funds

9.2. Hedge Funds

9.3. Private Equity and Venture Capital Funds

10. Summary

References

Practice Problems

Solutions

Basics of Portfolio Planning and Construction

Learning Outcomes

1. Introduction

2. The Investment Policy Statement

2.1. The Investment Policy Statement

2.2. Major Components of an IPS

3. IPS Risk and Return Objectives

3.1. Return Objectives

4. IPS Constraints

4.1. Liquidity Requirements

4.2. Time Horizon

4.3. Tax Concerns

4.4. Legal and Regulatory Factors

4.5. Unique Circumstances and ESG Considerations

5. Gathering Client Information

6. Portfolio Construction and Capital Market Expectations

6.1. Capital Market Expectations

7. Strategic Asset Allocation

8. Portfolio Construction Principles

8.1. New Developments in Portfolio Management

9. ESG Considerations in Portfolio Planning and Construction

10. Summary

Practice Problems

Solutions

The Behavioral Biases of Individuals

Learning Outcomes

1. Introduction

2. Behavioral Bias Categories

3. Cognitive Errors

3.1. Belief Perseverance Biases

3.1.1. Conservatism Bias

3.1.1.1. Consequences of Conservatism Bias

3.1.1.2. Detection of and Guidance for Overcoming Conservatism Bias

3.1.2. Confirmation Bias

3.1.2.1. Consequences of Confirmation Bias

3.1.2.2. Detection of and Guidance for Overcoming Confirmation Bias

3.1.3. Representativeness Bias

3.1.3.1. Consequences of Representativeness Bias

3.1.3.2. Detection of and Guidance on Overcoming Representativeness Bias

3.1.4. Illusion of Control Bias

3.1.4.1. Consequences of Illusion of Control

3.1.4.2. Detection of and Guidelines for Overcoming Illusion of Control Bias

3.1.5. Hindsight Bias

3.1.5.1. Consequences of Hindsight Bias

3.1.5.2. Detection of and Guidelines for Overcoming Hindsight Bias

3.2. Processing Errors

3.2.1. Anchoring and Adjustment Bias

3.2.1.1. Consequences of Anchoring and Adjustment Bias

3.2.1.2. Detection of and Guidelines for Overcoming Anchoring and Adjustment Bias

3.2.2. Mental Accounting Bias

3.2.2.1. Consequences of Mental Accounting Bias

3.2.2.2. Detection of and Guidelines for Overcoming Mental Accounting Bias

3.2.3. Framing Bias

3.2.3.1. Consequences of Framing Bias

3.2.3.2. Detection of and Guidelines for Overcoming Framing Bias

3.2.4. Availability Bias

3.2.4.1. Consequences of Availability Bias

3.2.4.2. Detection of and Guidelines for Overcoming Availability Bias

4. Emotional Biases

4.1. Loss-Aversion Bias

4.1.1.

4.1.1.1. Consequences of Loss Aversion

4.1.1.2. Detection of and Guidelines for Overcoming Loss Aversion

4.2. Overconfidence Bias

4.2.1.

4.2.1.1. Consequences of Overconfidence Bias

4.2.1.2. Detection of and Guidelines for Overcoming Overconfidence Bias

4.3. Self-Control Bias

4.3.1.

4.3.1.1. Consequences of Self-Control Bias

4.3.1.2. Detection of and Guidelines for Overcoming Self-Control Bias

4.4. Status Quo Bias

4.4.1.

4.4.1.1. Consequences of Status Quo Bias

4.4.1.2. Detection of and Guidelines for Overcoming Status Quo Bias

4.5. Endowment Bias

4.5.1.

4.5.1.1. Consequences of Endowment Bias

4.5.1.2. Detection of and Guidelines for Overcoming Endowment Bias

4.6. Regret-Aversion Bias

4.6.1.

4.6.1.1. Consequences of Regret-Aversion Bias

4.6.1.2. Detection of and Guidelines for Overcoming Regret-Aversion Bias

5. Behavioral Finance and Market Behavior

5.1. Defining Market Anomalies

5.2. Momentum

5.3. Bubbles and Crashes

5.4. Value

6. Summary

References

Practice Problems

Solutions

Introduction to Risk Management

Learning Outcomes

1. Introduction

2. Risk Management Process

3. Risk Management Framework

4. Risk Governance – An Enterprise View

4.1. An Enterprise View of Risk Governance

5. Risk Tolerance

6. Risk Budgeting

7. Identification of Risk – Financial Vs. Non-Financial Risk

7.1. Financial Risks

7.2. Non-Financial Risks

8. Interactions Between Risks

9. Measuring and Modifying Risk: Drivers and Metrics

9.1. Drivers

9.2. Metrics

10. Risk Modification: Prevention, Avoidance, and Acceptance

10.1. Risk Prevention and Avoidance

10.2. Risk Acceptance: Self-Insurance and Diversification

11. Risk Modification: Transferring, Shifting, and How to Choose

11.1. Risk Shifting

11.2. How to Choose Which Method for Modifying Risk

12. Summary

Practice Problems

Solutions

Ethical and Professional Standards

Ethics and Trust in the Investment Profession

Learning Outcomes

1. Introduction

2. Ethics

3. Ethics and Professionalism

3.1. How Professions Establish Trust

3.1.1. Professions normalize practitioner behavior.

3.1.2. Professions provide a service to society.

3.1.3. Professions are client focused.

3.1.4. Professions have high entry standards.

3.1.5. Professions possess a body of expert knowledge.

3.1.6. Professions encourage and facilitate continuing education.

3.1.7. Professions monitor professional conduct.

3.1.8. Professions are collegial.

3.1.9. Professions are recognized oversight bodies.

3.1.10. Professions encourage the engagement of members.

3.2. Professions Are Evolving

3.3. Professionalism in Investment Management

3.4. Trust in Investment Management

3.5. CFA Institute as an Investment Management Professional Body

4. Challenges to Ethical Conduct

5. Ethical vs. Legal Standards

6. Ethical Decision-Making Frameworks

6.1. The Framework for Ethical Decision-Making

6.2. Applying the Framework

7. Conclusion

8. Summary

Practice Problems

Solutions

Code of Ethics and Standards of Professional Conduct

Learning Outcomes

1. Preface

1.1. Evolution of the CFA Institute Code of Ethics and Standards of Professional Conduct

1.2. Standards of Practice Handbook

1.3. Summary of Changes in the Eleventh Edition

1.3.1. Inclusion of Updated CFA Institute Mission

1.3.2. Updated Code of Ethics Principle

1.3.3. New Standard Regarding Responsibilities of Supervisors [IV(C)]

1.3.4. Additional Requirement under the Standard for Communication with Clients and Prospective Clients [V(B)]

1.3.5. Modification to Standard VII(A)

1.3.6. General Guidance and Example Revision

1.4. CFA Institute Professional Conduct Program

1.5. Adoption of the Code and Standards

1.6. Acknowledgments

2. Ethics and the Investment Industry

2.1. Why Ethics Matters

2.1.1. Ethics, Society, and the Capital Markets

2.1.2. Capital Market Sustainability and the Actions of One

2.1.3. The Relationship between Ethics and Regulations

2.1.4. Applying an Ethical Framework

2.1.5. Commitment to Ethics by Firms

2.1.6. Ethical Commitment of CFA Institute

3. CFA Institute Code of Ethics and Standards of Professional Conduct

3.1. Preamble

3.2. The Code of Ethics

3.3. Standards of Professional Conduct

Practice Problems

Solutions

Guidance for Standards I–VII

Learning Outcomes

1. Standard I(A): Professionalism – Knowledge of the Law

1.1. Standard I(A) Knowledge of the Law

1.2. Guidance

1.2.1. Relationship between the Code and Standards and Applicable Law

1.2.2. Participation in or Association with Violations by Others

1.2.3. Investment Products and Applicable Laws

2. Standard I(A): Recommended Procedures

2.1. Members and Candidates

2.2. Distribution Area Laws

2.3. Legal Counsel

2.4. Dissociation

2.5. Firms

3. Standard I(A): Application of the Standard

3.1. Example 1 (Notification of Known Violations):

3.2. Example 2 (Dissociating from a Violation):

3.3. Example 3 (Dissociating from a Violation):

3.4. Example 4 (Following the Highest Requirements):

3.5. Example 5 (Following the Highest Requirements):

3.6. Example 6 (Laws and Regulations Based on Religious Tenets):

3.7. Example 7 (Reporting Potential Unethical Actions):

3.8. Example 8 (Failure to Maintain Knowledge of the Law):

4. Standard I(B): Professionalism – Independence and Objectivity

4.1. Guidance

4.1.1. Buy-Side Clients

4.1.2. Fund Manager and Custodial Relationships

4.1.3. Investment Banking Relationships

4.1.4. Performance Measurement and Attribution

4.1.5. Public Companies

4.1.6. Credit Rating Agency Opinions

4.1.7. Influence during the Manager Selection/Procurement Process

4.1.8. Issuer-Paid Research

4.1.9. Travel Funding

5. Standard I(B): Recommended Procedures

6. Standard I(B): Application of the Standard

6.1. Example 1 (Travel Expenses):

6.2. Example 2 (Research Independence):

6.3. Example 3 (Research Independence and Intrafirm Pressure):

6.4. Example 4 (Research Independence and Issuer Relationship Pressure):

6.5. Example 5 (Research Independence and Sales Pressure):

6.6. Example 6 (Research Independence and Prior Coverage):

6.7. Example 7 (Gifts and Entertainment from Related Party):

6.8. Example 8 (Gifts and Entertainment from Client):

6.9. Example 9 (Travel Expenses from External Manager):

6.10. Example 10 (Research Independence and Compensation Arrangements):

6.11. Example 11 (Recommendation Objectivity and Service Fees):

6.12. Example 12 (Recommendation Objectivity):

6.13. Example 13 (Influencing Manager Selection Decisions):

6.14. Example 14 (Influencing Manager Selection Decisions):

6.15. Example 15 (Fund Manager Relationships):

6.16. Example 16 (Intrafirm Pressure):

7. Standard I(C): Professionalism – Misrepresentation

7.1. Guidance

7.1.1. Impact on Investment Practice

7.1.2. Performance Reporting

7.1.3. Social Media

7.1.4. Omissions

7.1.5. Plagiarism

7.1.6. Work Completed for Employer

8. Standard I(C): Recommended Procedures

8.1. Factual Presentations

8.2. Qualification Summary

8.3. Verify Outside Information

8.4. Maintain Webpages

8.5. Plagiarism Policy

9. Standard I(C): Application of the Standard

9.1. Example 1 (Disclosure of Issuer-Paid Research):

9.2. Example 2 (Correction of Unintentional Errors):

9.3. Example 3 (Noncorrection of Known Errors):

9.4. Example 4 (Plagiarism):

9.5. Example 5 (Misrepresentation of Information):

9.6. Example 6 (Potential Information Misrepresentation):

9.7. Example 7 (Plagiarism):

9.8. Example 8 (Plagiarism):

9.9. Example 9 (Plagiarism):

9.10. Example 10 (Plagiarism):

9.11. Example 11 (Misrepresentation of Information):

9.12. Example 12 (Misrepresentation of Information):

9.13. Example 13 (Avoiding a Misrepresentation):

9.14. Example 14 (Misrepresenting Composite Construction):

9.15. Example 15 (Presenting Out-of-Date Information):

9.16. Example 16 (Overemphasis of Firm Results):

10. Standard I(D): Professionalism – Misconduct

10.1. Guidance

11. Standard I(D): Recommended Procedures

12. Standard I(D): Application of the Standard

12.1. Example 1 (Professionalism and Competence):

12.2. Example 2 (Fraud and Deceit):

12.3. Example 3 (Fraud and Deceit):

12.4. Example 4 (Personal Actions and Integrity):

12.5. Example 5 (Professional Misconduct):

13. Standard II(A): Integrity of Capital Markets – Material Nonpublic Information

13.1. Standard II(A) Material Nonpublic Information

13.2. Guidance

13.2.1. What Is “Material” Information?

13.2.2. What Constitutes “Nonpublic” Information?

13.2.3. Mosaic Theory

13.2.4. Social Media

13.2.5. Using Industry Experts

13.2.6. Investment Research Reports

14. Standard II(A): Recommended Procedures

14.1. Achieve Public Dissemination

14.2. Adopt Compliance Procedures

14.3. Adopt Disclosure Procedures

14.4. Issue Press Releases

14.5. Firewall Elements

14.6. Appropriate Interdepartmental Communications

14.7. Physical Separation of Departments

14.8. Prevention of Personnel Overlap

14.9. A Reporting System

14.10. Personal Trading Limitations

14.11. Record Maintenance

14.12. Proprietary Trading Procedures

14.13. Communication to All Employees

15. Standard II(A): Application of the Standard

15.1. Example 1 (Acting on Nonpublic Information):

15.2. Example 2 (Controlling Nonpublic Information):

15.3. Example 3 (Selective Disclosure of Material Information):

15.4. Example 4 (Determining Materiality):

15.5. Example 5 (Applying the Mosaic Theory):

15.6. Example 6 (Applying the Mosaic Theory):

15.7. Example 7 (Analyst Recommendations as Material Nonpublic Information):

15.8. Example 8 (Acting on Nonpublic Information):

15.9. Example 9 (Mosaic Theory):

15.10. Example 10 (Materiality Determination):

15.11. Example 11 (Using an Expert Network):

15.12. Example 12 (Using an Expert Network):

16. Standard II(B): Integrity of Capital Markets – Market Manipulation

16.1. Guidance

16.1.1. Information-Based Manipulation

16.1.2. Transaction-Based Manipulation

17. Standard II(B): Application of the Standard

17.1. Example 1 (Independent Analysis and Company Promotion):

17.2. Example 2 (Personal Trading Practices and Price):

17.3. Example 3 (Creating Artificial Price Volatility):

17.4. Example 4 (Personal Trading and Volume):

17.5. Example 5 (“Pump-Priming” Strategy):

17.6. Example 6 (Creating Artificial Price Volatility):

17.7. Example 7 (Pump and Dump Strategy):

17.8. Example 8 (Manipulating Model Inputs):

17.9. Example 9 (Information Manipulation):

18. Standard III(A): Duties to Clients – Loyalty, Prudence, and Care

18.1. Standard III(A) Loyalty, Prudence, and Care

18.2. Guidance

18.2.1. Understanding the Application of Loyalty, Prudence, and Care

18.2.2. Identifying the Actual Investment Client

18.2.3. Developing the Client’s Portfolio

18.2.4. Soft Commission Policies

18.2.5. Proxy Voting Policies

19. Standard III(A): Recommended Procedures

19.1. Regular Account Information

19.2. Client Approval

19.3. Firm Policies

20. Standard III(A): Application of the Standard

20.1. Example 1 (Identifying the Client—Plan Participants):

20.2. Example 2 (Client Commission Practices):

20.3. Example 3 (Brokerage Arrangements):

20.4. Example 4 (Brokerage Arrangements):

20.5. Example 5 (Client Commission Practices):

20.6. Example 6 (Excessive Trading):

20.7. Example 7 (Managing Family Accounts):

20.8. Example 8 (Identifying the Client):

20.9. Example 9 (Identifying the Client):

20.10. Example 10 (Client Loyalty):

20.11. Example 11 (Execution-Only Responsibilities):

21. Standard III(B): Duties to Clients – Fair Dealing

21.1. Guidance

21.1.1. Investment Recommendations

21.1.2. Investment Action

22. Standard III(B): Recommended Procedures

22.1. Develop Firm Policies

22.2. Disclose Trade Allocation Procedures

22.3. Establish Systematic Account Review

22.4. Disclose Levels of Service

23. Standard III(B): Application of the Standard

23.1. Example 1 (Selective Disclosure):

23.2. Example 2 (Fair Dealing between Funds):

23.3. Example 3 (Fair Dealing and IPO Distribution):

23.4. Example 4 (Fair Dealing and Transaction Allocation):

23.5. Example 5 (Selective Disclosure):

23.6. Example 6 (Additional Services for Select Clients):

23.7. Example 7 (Minimum Lot Allocations):

23.8. Example 8 (Excessive Trading):

23.9. Example 9 (Limited Social Media Disclosures):

23.10. Example 10 (Fair Dealing between Clients):

24. Standard III(C): Duties to Clients – Suitability

24.1. Guidance

24.1.1. Developing an Investment Policy

24.1.2. Understanding the Client’s Risk Profile

24.1.3. Updating an Investment Policy

24.1.4. The Need for Diversification

24.1.5. Addressing Unsolicited Trading Requests

24.1.6. Managing to an Index or Mandate

25. Standard III(C): Recommended Procedures

25.1. Investment Policy Statement

25.2. Regular Updates

25.3. Suitability Test Policies

26. Standard III(C): Application of the Standard

26.1. Example 1 (Investment Suitability—Risk Profile):

26.2. Example 2 (Investment Suitability—Entire Portfolio):

26.3. Example 3 (IPS Updating):

26.4. Example 4 (Following an Investment Mandate):

26.5. Example 5 (IPS Requirements and Limitations):

26.6. Example 6 (Submanager and IPS Reviews):

26.7. Example 7 (Investment Suitability—Risk Profile):

26.8. Example 8 (Investment Suitability):

27. Standard III(D): Duties to Clients – Performance Presentation

27.1. Guidance

28. Standard III(D): Recommended Procedures

28.1. Apply the GIPS Standards

28.2. Compliance without Applying GIPS Standards

29. Standard III(D): Application of the Standard

29.1. Example 1 (Performance Calculation and Length of Time):

29.2. Example 2 (Performance Calculation and Asset Weighting):

29.3. Example 3 (Performance Presentation and Prior Fund/Employer):

29.4. Example 4 (Performance Presentation and Simulated Results):

29.5. Example 5 (Performance Calculation and Selected Accounts Only):

29.6. Example 6 (Performance Attribution Changes):

29.7. Example 7 (Performance Calculation Methodology Disclosure):

29.8. Example 8 (Performance Calculation Methodology Disclosure):

30. Standard III(E): Duties to Clients – Preservation of Confidentiality

30.1. Guidance

30.1.1. Status of Client

30.1.2. Compliance with Laws

30.1.3. Electronic Information and Security

30.1.4. Professional Conduct Investigations by CFA Institute

31. Standard III(E): Recommended Procedures

31.1. Communicating with Clients

32. Standard III(E): Application of the Standard

32.1. Example 1 (Possessing Confidential Information):

32.2. Example 2 (Disclosing Confidential Information):

32.3. Example 3 (Disclosing Possible Illegal Activity):

32.4. Example 4 (Disclosing Possible Illegal Activity):

32.5. Example 5 (Accidental Disclosure of Confidential Information):

33. Standard IV(A): Duties to Employers – Loyalty

33.1. Standard IV(A) Loyalty

33.2. Guidance

33.2.1. Employer Responsibilities

33.2.2. Independent Practice

33.2.3. Leaving an Employer

33.2.4. Use of Social Media

33.2.5. Whistleblowing

33.2.6. Nature of Employment

34. Standard IV(A): Recommended Procedures

34.1. Competition Policy

34.2. Termination Policy

34.3. Incident-Reporting Procedures

34.4. Employee Classification

35. Standard IV(A): Application of the Standard

35.1. Example 1 (Soliciting Former Clients):

35.2. Example 2 (Former Employer’s Documents and Files):

35.3. Example 3 (Addressing Rumors):

35.4. Example 4 (Ownership of Completed Prior Work):

35.5. Example 5 (Ownership of Completed Prior Work):

35.6. Example 6 (Soliciting Former Clients):

35.7. Example 7 (Starting a New Firm):

35.8. Example 8 (Competing with Current Employer):

35.9. Example 9 (Externally Compensated Assignments):

35.10. Example 10 (Soliciting Former Clients):

35.11. Example 11 (Whistleblowing Actions):

35.12. Example 12 (Soliciting Former Clients):

35.13. Example 13 (Notification of Code and Standards):

35.14. Example 14 (Leaving an Employer):

35.15. Example 15 (Confidential Firm Information):

36. Standard IV(B): Duties to Employers – Additional Compensation Arrangements

36.1. Guidance

37. Standard IV(B): Recommended Procedures

38. Standard IV(B): Application of the Standard

38.1. Example 1 (Notification of Client Bonus Compensation):

38.2. Example 2 (Notification of Outside Compensation):

38.3. Example 3 (Prior Approval for Outside Compensation):

39. Standard IV(C): Duties to Employers – Responsibilities of Supervisors

39.1. Guidance

39.1.1. System for Supervision

39.1.2. Supervision Includes Detection

40. Standard IV(C): Recommended Procedures

40.1. Codes of Ethics or Compliance Procedures

40.2. Adequate Compliance Procedures

40.3. Implementation of Compliance Education and Training

40.4. Establish an Appropriate Incentive Structure

41. Standard IV(C): Application of the Standard

41.1. Example 1 (Supervising Research Activities):

41.2. Example 2 (Supervising Research Activities):

41.3. Example 3 (Supervising Trading Activities):

41.4. Example 4 (Supervising Trading Activities and Record Keeping):

41.5. Example 5 (Accepting Responsibility):

41.6. Example 6 (Inadequate Procedures):

41.7. Example 7 (Inadequate Supervision):

41.8. Example 8 (Supervising Research Activities):

41.9. Example 9 (Supervising Research Activities):

42. Standard V(A): Investment Analysis, Recommendations, and Actions – Diligence and Reasonable Basis

42.1. Standard V(A) Diligence and Reasonable Basis

42.2. Guidance

42.2.1. Defining Diligence and Reasonable Basis

42.2.2. Using Secondary or Third-Party Research

42.2.3. Using Quantitatively Oriented Research

42.2.4. Developing Quantitatively Oriented Techniques

42.2.5. Selecting External Advisers and Subadvisers

42.2.6. Group Research and Decision Making

43. Standard V(A): Recommended Procedures

44. Standard V(A): Application of the Standard

44.1. Example 1 (Sufficient Due Diligence):

44.2. Example 2 (Sufficient Scenario Testing):

44.3. Example 3 (Developing a Reasonable Basis):

44.4. Example 4 (Timely Client Updates):

44.5. Example 5 (Group Research Opinions):

44.6. Example 6 (Reliance on Third-Party Research):

44.7. Example 7 (Due Diligence in Submanager Selection):

44.8. Example 8 (Sufficient Due Diligence):

44.9. Example 9 (Sufficient Due Diligence):

44.10. Example 10 (Sufficient Due Diligence):

44.11. Example 11 (Use of Quantitatively Oriented Models):

44.12. Example 12 (Successful Due Diligence/Failed Investment):

44.13. Example 13 (Quantitative Model Diligence):

44.14. Example 14 (Selecting a Service Provider):

44.15. Example 15 (Subadviser Selection):

44.16. Example 16 (Manager Selection):

44.17. Example 17 (Technical Model Requirements):

45. Standard V(B): Investment Analysis, Recommendations, and Actions – Communication with Clients and Prospective Clients

45.1. Guidance

45.1.1. Informing Clients of the Investment Process

45.1.2. Different Forms of Communication

45.1.3. Identifying Risks and Limitations

45.1.4. Report Presentation

45.1.5. Distinction between Facts and Opinions in Reports

46. Standard V(B): Recommended Procedures

47. Standard V(B): Application of the Standard

47.1. Example 1 (Sufficient Disclosure of Investment System):

47.2. Example 2 (Providing Opinions as Facts):

47.3. Example 3 (Proper Description of a Security):

47.4. Example 4 (Notification of Fund Mandate Change):

47.5. Example 5 (Notification of Fund Mandate Change):

47.6. Example 6 (Notification of Changes to the Investment Process):

47.7. Example 7 (Notification of Changes to the Investment Process):

47.8. Example 8 (Notification of Changes to the Investment Process):

47.9. Example 9 (Sufficient Disclosure of Investment System):

47.10. Example 10 (Notification of Changes to the Investment Process):

47.11. Example 11 (Notification of Errors):

47.12. Example 12 (Notification of Risks and Limitations):

47.13. Example 13 (Notification of Risks and Limitations):

47.14. Example 14 (Notification of Risks and Limitations):

48. Standard V(C): Investment Analysis, Recommendations, and Actions – Record Retention

48.1. Guidance

48.1.1. New Media Records

48.1.2. Records Are Property of the Firm

48.1.3. Local Requirements

49. Standard V(C): Recommended Procedures

50. Standard V(C): Application of the Standard

50.1. Example 1 (Record Retention and IPS Objectives and Recommendations):

50.2. Example 2 (Record Retention and Research Process):

50.3. Example 3 (Records as Firm, Not Employee, Property):

51. Standard VI(A): Conflicts of Interest – Disclosure of Conflicts

51.1. Standard VI(A) Disclosure of Conflicts

51.2. Guidance

51.2.1. Disclosure of Conflicts to Employers

51.2.2. Disclosure to Clients

51.2.3. Cross-Departmental Conflicts

51.2.4. Conflicts with Stock Ownership

51.2.5. Conflicts as a Director

52. Standard VI(A): Recommended Procedures

53. Standard VI(A): Application of the Standard

53.1. Example 1 (Conflict of Interest and Business Relationships):

53.2. Example 2 (Conflict of Interest and Business Stock Ownership):

53.3. Example 3 (Conflict of Interest and Personal Stock Ownership):

53.4. Example 4 (Conflict of Interest and Personal Stock Ownership):

53.5. Example 5 (Conflict of Interest and Compensation Arrangements):

53.6. Example 6 (Conflict of Interest, Options, and Compensation Arrangements):

53.7. Example 7 (Conflict of Interest and Compensation Arrangements):

53.8. Example 8 (Conflict of Interest and Directorship):

53.9. Example 9 (Conflict of Interest and Personal Trading):

53.10. Example 10 (Conflict of Interest and Requested Favors):

53.11. Example 11 (Conflict of Interest and Business Relationships):

53.12. Example 12 (Disclosure of Conflicts to Employers):

54. Standard VI(B): Conflicts of Interest – Priority of Transactions

54.1. Guidance

54.1.1. Avoiding Potential Conflicts

54.1.2. Personal Trading Secondary to Trading for Clients

54.1.3. Standards for Nonpublic Information

54.1.4. Impact on All Accounts with Beneficial Ownership

55. Standard VI(B): Recommended Procedures

56. Standard VI(B): Application of the Standard

56.1. Example 1 (Personal Trading):

56.2. Example 2 (Trading for Family Member Account):

56.3. Example 3 (Family Accounts as Equals):

56.4. Example 4 (Personal Trading and Disclosure):

56.5. Example 5 (Trading Prior to Report Dissemination):

57. Standard VI(C): Conflicts of Interest – Referral Fees

57.1. Guidance

58. Standard VI(C): Recommended Procedures

59. Standard VI(C): Application of the Standard

59.1. Example 1 (Disclosure of Referral Arrangements and Outside Parties):

59.2. Example 2 (Disclosure of Interdepartmental Referral Arrangements):

59.3. Example 3 (Disclosure of Referral Arrangements and Informing Firm):

59.4. Example 4 (Disclosure of Referral Arrangements and Outside Organizations):

59.5. Example 5 (Disclosure of Referral Arrangements and Outside Parties):

60. Standard VII(A): Responsibilities as a CFA Institute Member or CFA Candidate – Conduct as Participants in CFA Institute Programs

60.1. Standard VII(A) Conduct as Participants in CFA Institute Programs

60.2. Guidance

60.2.1. Confidential Program Information

60.2.2. Additional CFA Program Restrictions

60.2.3. Expressing an Opinion

61. Standard VII(A): Application of the Standard

61.1. Example 1 (Sharing Exam Questions):

61.2. Example 2 (Bringing Written Material into Exam Room):

61.3. Example 3 (Writing after Exam Period End):

61.4. Example 4 (Sharing Exam Content):

61.5. Example 5 (Sharing Exam Content):

61.6. Example 6 (Sharing Exam Content):

61.7. Example 7 (Discussion of Exam Grading Guidelines and Results):

61.8. Example 8 (Compromising CFA Institute Integrity as a Volunteer):

61.9. Example 9 (Compromising CFA Institute Integrity as a Volunteer):

62. Standard VII(B): Responsibilities as a CFA Institute Member or CFA Candidate – Reference to CFA Institute, the CFA Designation, and the CFA Program

62.1. Guidance

62.1.1. CFA Institute Membership

62.1.2. Using the CFA Designation

62.1.3. Referring to Candidacy in the CFA Program

63. Standard VII(B): Recommended Procedures

64. Standard VII(B): Application of the Standard

64.1. Example 1 (Passing Exams in Consecutive Years):

64.2. Example 2 (Right to Use CFA Designation):

64.3. Example 3 (“Retired” CFA Institute Membership Status):

64.4. Example 4 (Stating Facts about CFA Designation and Program):

64.5. Example 5 (Order of Professional and Academic Designations):

64.6. Example 6 (Use of Fictitious Name):

Practice Problems

Solutions

Introduction to the Global Investment Performance Standards (GIPS)

Learning Outcomes

1. Introduction

2. Why Were the GIPS Standards Created, Who Can Claim Compliance, & Who Benefits from Compliance?

2.1. Who Can Claim Compliance?

2.2. Who Benefits from Compliance?

3. Composites

4. Fundamentals of Compliance

5. Verification

Practice Problems

Solutions

Ethics Application

Learning Outcomes

1. Introduction

2. Professionalism

2.1. Knowledge of the Law

2.1.1. Mandracken

2.1.1.1. Analysis

2.1.2. Pellie

2.1.2.1. Analysis

2.1.3. Mwangi

2.1.3.1. Analysis

2.2. Independence and Objectivity

2.2.1. Myers

2.2.1.1. Analysis

2.3. Misrepresentation

2.3.1. Lee

2.3.1.1. Analysis

2.3.2. Andersen

2.3.2.1. Analysis

2.3.3. Brodeur

2.3.3.1. Analysis

2.4. Misconduct

2.4.1. Hanse

2.4.1.1. Analysis

2.4.2. Mang

2.4.2.1. Analysis

3. Integrity of Capital Markets

3.1. Material Nonpublic Information

3.1.1. Khatri

3.1.1.1. Analysis

3.1.2. Kwame

3.1.2.1. Analysis

3.2. Market Manipulation

3.2.1. Abbha

3.2.1.1. Analysis

4. Duties to Clients

4.1. Loyalty, Prudence, and Care

4.1.1. Maste

4.1.1.1. Analysis

4.1.2. Gaini

4.1.2.1. Analysis

4.1.3. Braung

4.1.3.1. Analysis

4.2. Fair Dealing

4.2.1. Scherzer

4.2.1.1. Analysis

4.3. Suitability

4.3.1. Marte

4.3.1.1. Analysis

4.3.2. Duri

4.3.2.1. Analysis

4.4. Performance Presentation

4.4.1. Jergenn

4.4.1.1. Analysis

4.5. Preservation of Confidentiality

4.5.1. Giddings and Marsh

4.5.1.1. Analysis

5. Duties to Employers

5.1. Loyalty

5.1.1. Nickoli

5.1.1.1. Analysis

5.1.2. Kuznetsov

5.1.2.1. Analysis

5.1.3. Clemence

5.1.3.1. Analysis

5.2. Additional Compensation Arrangements

5.2.1. Estevez

5.2.1.1. Analysis

5.3. Responsibilities of Supervisors

5.3.1. Duhih

5.3.1.1. Analysis

5.3.2. Denikin & Denikin

5.3.2.1. Analysis

6. Investment Analysis, Recommendations, and Actions

6.1. Diligence and Reasonable Basis

6.1.1. Harrel and Chong

6.1.1.1. Analysis

6.2. Communication with Clients and Prospective Clients

6.2.1. Maalouf

6.2.1.1. Analysis

6.2.2. Dukis

6.2.2.1. Analysis

6.3. Record Retention

6.3.1. Duermott

6.3.1.1. Analysis

7. Conflicts of Interest

7.1. Disclosure of Conflicts

7.1.1. Reebh

7.1.1.1. Analysis

7.2. Priority of Transactions

7.2.1. Yang

7.2.1.1. Analysis

7.2.2. Kapadia

7.2.2.1. Analysis

7.2.3. Perrkins

7.2.3.1. Analysis

7.3. Referral Fees

7.3.1. Kiang

7.3.1.1. Analysis

8. Responsibilities as a CFA Institute Member or CFA Candidate

8.1. Conduct as Participants in CFA Institute Programs

8.1.1. Taveras

8.1.1.1. Analysis

8.2. Reference to CFA Institute, the CFA Designation, and the CFA Program

8.2.1. Ahmed

8.2.1.1. Analysis

Glossary

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