2022 CFA Program Curriculum Level I Corporate Finance, Equity, And Fixed Income

How to Use the CFA Program Curriculum
	Background on the CBOK
		Organization of the Curriculum
			Features of the Curriculum
			Designing Your Personal Study Program
			CFA Institute Learning Ecosystem (LES)
			Prep Providers
			Feedback
Fixed Income
	14
	Fixed Income (2)
		43
		Understanding Fixed-­Income Risk and Return
			Introduction
			Sources of Return
			Macaulay and Modified Duration
				3.1 Macaulay, Modified, and Approximate Duration
			Approximate Modified and Macaulay Duration
			Effective and Key Rate Duration
				5.1 Key Rate Duration
			Properties of Bond Duration
			Duration of a Bond Portfolio
			Money Duration and the Price Value of a Basis Point
			Bond Convexity
			Investment Horizon, Macaulay Duration and Interest Rate Risk
				10.1 Yield Volatility
				10.2 Investment Horizon, Macaulay Duration, and Interest Rate Risk
			Credit and Liquidity Risk
			Empirical Duration
			Summary
			Practice Problems
			Solutions
		44
		Fundamentals of Credit Analysis
			Introduction
			Credit Risk
			Capital Structure, Seniority Ranking, and Recovery Rates
				3.1 Capital Structure
				3.2 Seniority Ranking
				3.3 Recovery Rates
			Rating Agencies, Credit Ratings, and Their Role in the Debt Markets
				4.1 Credit Ratings
				4.2 Issuer vs. Issue Ratings
				4.3 ESG Ratings
				4.4 Risks in Relying on Agency Ratings
			Traditional Credit Analysis: Corporate Debt Securities
				5.1 Credit Analysis vs. Equity Analysis: Similarities and Differences
				5.2 The Four Cs of Credit Analysis: A Useful Framework
			Credit Risk vs. Return: Yields and Spreads
				6.1 Credit Risk vs. Return: The Price Impact of Spread Changes
			High-­Yield, Sovereign, and Non-­Sovereign Credit Analysis
				7.1 High Yield
				7.2 Sovereign Debt
				7.3 Non-­Sovereign Government Debt
			Summary
			Practice Problems
			Solutions
Derivatives
	15
	Derivatives
		45
		Derivative Markets and Instruments
			Derivatives: Introduction, Definitions, and Uses
				Derivatives: Definitions and Uses
			The Structure of Derivative Markets
				2.1 Exchange-­Traded Derivatives Markets
				2.2 Over-­the-­Counter Derivatives Markets
			Types of Derivatives: Introduction, Forward Contracts
				3.1 Forward Commitments
			Types of Derivatives: Futures
			Types of Derivatives: Swaps
			Contingent Claims: Options
				6.1 Options
			Contingent Claims: Credit Derivatives
			Types of Derivatives: Asset-­Backed Securities and Hybrids
				8.1 Hybrids
			Derivatives Underlyings
				9.1 Equities
				9.2 Fixed-­Income Instruments and Interest Rates
				9.3 Currencies
				9.4 Commodities
				9.5 Credit
				9.6 Other
			The Purposes and Benefits of Derivatives
				10.1 Risk Allocation, Transfer, and Management
				10.2 Information Discovery
				10.3 Operational Advantages
				10.4 Market Efficiency
			Criticisms and Misuses of Derivatives
				11.1 Speculation and Gambling
				11.2 Destabilization and Systemic Risk
			Elementary Principles of Derivative Pricing
				12.1 Storage
				12.2 Arbitrage
			Summary
			Practice Problems
			Solutions
		46
		Basics of Derivative Pricing and Valuation
			Introduction
			Basic Derivative Concepts, Pricing the Underlying
				2.1 Basic Derivative Concepts
				2.2 Pricing the Underlying
			The Principle of Arbitrage
				3.1 The (In)Frequency of Arbitrage Opportunities
				3.2 Arbitrage and Derivatives
				3.3 Arbitrage and Replication
				3.4 Risk Aversion, Risk Neutrality, and Arbitrage-­Free Pricing
				3.5 Limits to Arbitrage
			Pricing and Valuation of Forward Contracts: Pricing vs. Valuation; Expiration; Initiation
				4.1 Pricing and Valuation of Forward Commitments
			Pricing and Valuation of Forward Contracts: Between Initiation and Expiration; Forward Rate Agreements
				5.1 A Word about Forward Contracts on Interest Rates
			Pricing and Valuation of Futures Contracts
			Pricing and Valuation of Swap Contracts
			Pricing and Valuation of Options
				8.1 European Option Pricing
			Lower Limits for Prices of European Options
			Put-­Call Parity, Put-­Call-­Forward Parity
				10.1 Put–Call–Forward Parity
			Binomial Valuation of Options
			American Option Pricing
			Summary
			Practice Problems
			Solutions
Alternative Investments
	16
	Alternative Investments
		47
		Introduction to Alternative Investments
			Introduction
				1.1 Why Investors Consider Alternative Investments
				1.2 Categories of Alternative Investments
			Investment Methods
				2.1 Methods of Investing in Alternative Investments
				2.2 Advantages and Disadvantages of Direct Investing, Co-­Investing, and Fund Investing
				2.3 Due Diligence for Fund Investing, Direct Investing, and Co-­Investing
			Investment and Compensation Structures
				3.1 Partnership Structures
				3.2 Compensation Structures
				3.3 Common Investment Clauses, Provisions, and Contingencies
			Hedge Funds
				4.1 Characteristics of Hedge Funds
				4.2 Hedge Fund Strategies
				4.3 Hedge Funds and Diversification Benefits
			Private Capital
				5.1 Overview of Private Capital
				5.2 Description: Private Equity
				5.3 Description: Private Debt
				5.4 Risk/Return of Private Equity
				5.5 Risk/Return of Private Debt
				5.6 Diversification Benefits of Investing in Private Capital
			Natural Resources
				6.1 Overview of Natural Resources
				6.2 Characteristics of Natural Resources
				6.3 Risk/Return of Natural Resources
				6.4 Diversification Benefits of Natural Resources
				6.5 Instruments
			Real Estate
				7.1 Overview of the Real Estate Market
				7.2 Characteristics: Forms of Real Estate Ownership
				7.3 Characteristics: Real Estate Investment Categories
				7.4 Risk and Return Characteristics
				7.5 Diversification Benefits
			Infrastructure
				8.1 Introduction and Overview
				8.2 Description
				8.3 Risk and Return Characteristics
				8.4 Diversification Benefits
			Issues in Performance Appraisal
				9.1 Overview of Performance Appraisal for Alternative Investments
				9.2 Common Approaches to Performance Appraisal and Application Challenges
				9.3 Private Equity and Real Estate Performance Evaluation
				9.4 Hedge Funds: Leverage, Illiquidity, and Redemption Terms
			Calculating Fees and Returns
				10.1 Alternative Asset Fee Structures and Terms
				10.2 Custom Fee Arrangements
				10.3 Alignment of Interests and Survivorship Bias
			Summary
Portfolio Management
	17
	Portfolio Management (1)
		48
		Portfolio Management: An Overview
			Introduction
			Portfolio Perspective: Diversification and Risk Reduction
				2.1 Historical Example of Portfolio Diversification: Avoiding Disaster
				2.2 Portfolios: Reduce Risk
			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
			Steps in the Portfolio Management Process
				4.1 Step One: The Planning Step
				4.2 Step Two: The Execution Step
				4.3 Step Three: The Feedback Step
			Types of Investors
				5.1 Individual Investors
				5.2 Institutional Investors
			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
			Pooled Interest - Mutual Funds
				7.1 Mutual Funds
			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
			Pooled Interest - Other Investment Products
				9.1 Exchange-­Traded Funds
				9.2 Hedge Funds
				9.3 Private Equity and Venture Capital Funds
			Summary
			Practice Problems
			Solutions
		49
		Portfolio Risk and Return: Part I
			Introduction
			Investment Characteristics of Assets: Return
				2.1 Return
			Money-­Weighted Return or Internal Rate of Return
			Time-­Weighted Rate of Return
			Annualized Return
			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
			Historical Return and Risk
				7.1 Historical Mean Return and Expected Return
				7.2 Nominal Returns of Major US Asset Classes
				7.3 Real Returns of Major US Asset Classes
				7.4 Nominal and Real Returns of Asset Classes in Major Countries
				7.5 Risk of Major Asset Classes
				7.6 Risk–Return Trade-­off
			Other Investment Characteristics
				8.1 Distributional Characteristics
				8.2 Market Characteristics
			Risk Aversion and Portfolio Selection & The Concept of Risk Aversion
				9.1 The Concept of Risk Aversion
			Utility Theory and Indifference Curves
				10.1 Indifference Curves
			Application of Utility Theory to Portfolio Selection
			Portfolio Risk & Portfolio of Two Risky Assets
				12.1 Portfolio of Two Risky Assets
			Portfolio of Many Risky Assets
				13.1 Importance of Correlation in a Portfolio of Many Assets
			The Power of Diversification
				14.1 Correlation and Risk Diversification
				14.2 Historical Risk and Correlation
				14.3 Historical Correlation among Asset Classes
				14.4 Avenues for Diversification
			Efficient Frontier: Investment Opportunity Set & Minimum Variance Portfolios
				15.1 Investment Opportunity Set
				15.2 Minimum-­Variance Portfolios
			Efficient Frontier: A Risk-­Free Asset and Many Risky Assets
				16.1 Capital Allocation Line and Optimal Risky Portfolio
				16.2 The Two-­Fund Separation Theorem
			Efficient Frontier: Optimal Investor Portfolio
				17.1 Investor Preferences and Optimal Portfolios
			Summary
			Practice Problems
			Solutions
		50
		Portfolio Risk and Return: Part II
			Introduction
			Capital Market Theory: Risk-­Free and Risky Assets
				2.1 Portfolio of Risk-­Free and Risky Assets
			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)
			Capital Market Theory: CML - Leveraged Portfolios
				4.1 Leveraged Portfolios with Different Lending and Borrowing Rates
			Systematic and Nonsystematic Risk
				5.1 Systematic Risk and Nonsystematic Risk
			Return Generating Models
				6.1 Return-­Generating Models
				6.2 Decomposition of Total Risk for a Single-­Index Model
				6.3 Return-­Generating Models: The Market Model
			Calculation and Interpretation of Beta
				7.1 Estimation of Beta
				7.2 Beta and Expected Return
			Capital Asset Pricing Model: Assumptions and the Security Market Line
				8.1 Assumptions of the CAPM
				8.2 The Security Market Line
			Capital Asset Pricing Model: Applications
				9.1 Estimate of Expected Return
			Beyond CAPM: Limitations and Extensions of CAPM
				10.1 Limitations of the CAPM
				10.2 Extensions to the CAPM
			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
			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
			Summary
			Practice Problems
			Solutions