2022 CFA Program Curriculum Level II Box Set (vol. 1-6)

2022 CFA Program Curriculum Level II Volumes 1-6
	Quantitative Methods and Economics
		Title Page
		Contents
		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
		Quantitative Methods
			Study Session 1 Quantitative Methods (1)
				Reading 1 Introduction to Linear Regression
					Simple Linear Regression
					Estimating the Parameters of a Simple Linear Regression
						The Basics of Simple Linear Regression
						Estimating the Regression Line
						Interpreting the Regression Coefficients
						Cross-Sectional vs. Time-Series Regressions
					Assumptions of the Simple Linear Regression Model
						Assumption 1: Linearity
						Assumption 2: Homoskedasticity
						Assumption 3: Independence
						Assumption 4: Normality
					Analysis of Variance
						Breaking down the Sum of Squares Total into Its Components
						Measures of Goodness of Fit
						ANOVA and Standard Error of Estimate in Simple Linear Regression
					Hypothesis Testing of Linear Regression Coefficients
						Hypothesis Tests of the Slope Coefficient
						Hypothesis Tests of the Intercept
						Hypothesis Tests of Slope When Independent Variable Is an Indicator Variable
						Test of Hypotheses: Level of Significance and p-Values
					Prediction Using Simple Linear Regression and Prediction Intervals
					Functional Forms for Simple Linear Regression
						The Log-Lin Model
						The Lin-Log Model
						The Log-Log Model
						Selecting the Correct Functional Form
					Summary
					Practice Problems
					Solutions
				Reading 2 Multiple Regression
					Testing the Whole Multiple Linear Regression Model and Adjusted R-square
						Adjusted R2
					Multiple Linear Regression Assumptions, Testing Coefficients, and Prediction
						Multiple Linear Regression
					Dummy Variables in a Multiple Linear Regression
						Defining a Dummy Variable
						Visualizing and Interpreting Dummy Variables
						Testing for Statistical Significance
					Violations of Regression Assumptions: Heteroskedasticity
						Heteroskedasticity
					Violations of Regression Assumptions: Serial Correlation
						The Consequences of Serial Correlation
						Testing for Serial Correlation
						Correcting for Serial Correlation
					Violations of Regression Assumptions: Multicollinearity
						The Consequences of Multicollinearity
						Detecting Multicollinearity
						Correcting for Multicollinearity
						Heteroskedasticity, Serial Correlation, Multicollinearity: Summarizing the Issues
					Model Specification Errors
						Principles of Model Specification
						Misspecified Functional Form
						Time-Series Misspecification (Independent Variables Correlated with Errors)
						Other Types of Time-Series Misspecification
					Multiple Linear Regression with Qualitative Dependent Variables
						Models with Qualitative Dependent Variables
					Summary
					Practice Problems
					Solutions
				Reading 3 Time-Series Analysis
					Introduction to Time-Series Analysis and Challenges of Working with Time Series
						Challenges of Working with Time Series
					Linear Trend Models
						Linear Trend Models
					Log-Linear Trend Models
					Trend Models and Testing for Correlated Errors
					Autoregressive (AR) Time-Series Models and Covariance-Stationary Series
						Covariance-Stationary Series
					Detecting Serially Correlated Errors in an Autoregressive Model
					Mean Reversion and Multiperiod Forecasts and the Chain Rule of Forecasting
						Multiperiod Forecasts and the Chain Rule of Forecasting
					Comparing Forecast Model Performance
					Instability of Regression Coefficients
					Random Walks
						Random Walks
					The Unit Root Test of Nonstationarity
					Moving-Average Time-Series Models
						Smoothing Past Values with an n-Period Moving Average
						Moving-Average Time-Series Models for Forecasting
					Seasonality in Time-Series Models
					Autoregressive Moving-Average Models and Autoregressive Conditional Heteroskedasticity Models
						Autoregressive Conditional Heteroskedasticity Models
					Regressions with More Than One Time Series
					Other Issues in Time Series and Suggested Steps in Time-Series Forecasting
						Suggested Steps in Time-Series Forecasting
					Summary
					Practice Problems
					Solutions
			Study Session 2 Quantitative Methods (2)
				Reading 4 Machine Learning
					Introduction
						Machine Learning and Investment Management
					What is Machine Learning
						Defining Machine Learning
						Supervised Learning
						Unsupervised Learning
						Deep Learning and Reinforcement Learning
						Summary of ML Algorithms and How to Choose among Them
					Overview of Evaluating ML Algorithm Performance
						Generalization and Overfitting
						Errors and Overfitting
						Preventing Overfitting in Supervised Machine Learning
					Supervised Machine Learning Algorithms: Penalized Regression
						Penalized Regression
					Support Vector Machine
					K-Nearest Neighbor
					Classification and Regression Tree
					Ensemble Learning and Random Forest
						Voting Classifiers
						Bootstrap Aggregating (Bagging)
						Random Forest
					Case Study: Classification of Winning and Losing Funds
						Data Description
						Methodology
						Results
						Conclusion
					Unsupervised Machine Learning Algorithms and Principal Component Analysis
						Principal Components Analysis
					Clustering
					K-Means Clustering
					Hierarchical Clustering: Agglomerative and Dendrograms
						Dendrograms
					Case Study: Clustering Stocks Based on Co-Movement Similarity
					Neural Networks, Deep Learning Nets and Reinforcement Learning and Neural Networks
						Neural Networks
					Deep Learning Nets, Reinforcement and Learning
						Reinforcement Learning
					Case Study: Deep Neural Network–Based Equity Factor Model
						Introduction
						Data Description
						Experimental Design
						Results
					Choosing an Appropriate ML Algorithm
					Summary
					Practice Problems
					Solutions
				Reading 5 Big Data Projects
					Introduction and Big Data in Investment Management
						Big Data in Investment Management
					Steps in Executing a Data Analysis Project: Financial Forecasting with Big Data
					Data preparation and Wrangling
						Structured Data
					Unstructured (Text) Data
						Text Preparation (Cleansing)
						Text Wrangling (Preprocessing)
					Data Exploration Objectives and Methods and Structured Data
						Structured Data
					Unstructured Data - Text Exploration
						Exploratory Data Analysis
						Feature Selection
						Feature Engineering
					Model Training, Structured and Unstructured Data, Method Selection
						Structured and Unstructured Data
					Performance Evaluation
					Tuning
					Financial Forecasting Project - Classifying and Predicting Sentiment for Stocks, and Text Curation, Preparation and Wrangling
						Text Curation, Preparation, and Wrangling
					Data Exploration
						Exploratory Data Analysis
						Feature Selection
						Feature Engineering
					Model Training
						Method Selection
						Performance Evaluation and Tuning
					Results and Interpretation
					Summary
					Practice Problems
					Solutions
		Economics
			Study Session 3 Economics
				Reading 6 Currency Exchange Rates: Understanding Equilibrium Value
					Introduction
					Foreign Exchange Market Concepts
					Arbitrage Constraints on Spot Exchange Rate Quotes
					Forward Markets
					The Mark-to-Market Value of a Forward Contract
					A Long-Term Framework for Exchange Rates: International Parity Conditions
						International Parity Conditions
					Covered Interest Rate Parity, Uncovered Interest Rate Parity, & Forward Rate Parity
						Uncovered Interest Rate Parity
						Forward Rate Parity
					Purchasing Power Parity
					The Fisher Effect, Real Interest Rate Parity and Tying the International Parity Conditions Together
						International Parity Conditions: Tying All the Pieces Together
					The Carry Trade
					The Impact of Balance of Payments Flows: Current Account Imbalances and the Determination of Exchange Rates
						Current Account Imbalances and the Determination of Exchange Rates
					Capital Flows and the Determination of Exchange Rates and Equity Market Trends and Exchange Rates,
						Equity Market Trends and Exchange Rates
					Monetary and Fiscal Policies
						The Mundell–Fleming Model
						Monetary Models of Exchange Rate Determination
						The Portfolio Balance Approach
					Exchange Rate Management: Intervention and Controls
					Warning Signs of a Currency Crisis
					Summary
					Appendix
					Practice Problems
					Solutions
				Reading 7 Economic Growth
					An Introduction to Growth in the Global Economy: Developed vs. Developing Economies
						Growth in the Global Economy: Developed vs. Developing Economies
					Factors Favoring and Limiting Economic Growth
						Financial Markets and Intermediaries
						Political Stability, Rule of Law, and Property Rights
						Education and Health Care Systems
						Tax and Regulatory Systems
						Free Trade and Unrestricted Capital Flows
						Summary of Factors Limiting Growth in Developing Countries
					Why Potential Growth Matters to Investors
					Determinants of Economic Growth: Production Function and Growth Accounting
						Production Function
						Growth Accounting
						Extending the Production Function
					Capital Deepening vs. Technological Progress
					Natural Resources
					Labor Supply
						Population Growth
						Labor Force Participation
						Net Migration
						Average Hours Worked
						Labor Quality: Human Capital
					Capital: ICT & Non-ICT, Technology and Public Infrastructure
						Technology
						Public Infrastructure
					Summary of Economic Growth Determinants
					Theories of Growth, Classical and Neoclassical Economic Models and Balanced or Steady State Rate of Growth
						Classical Model
						Neoclassical Model
					Implications of Neoclassical Model
					Extension of Neoclassical Model
					Endogenous Growth Model
					Convergence Hypotheses
					Growth In An Open Economy
					Summary
					Practice Problems
					Solutions
				Reading 8 Economics of Regulation
					Introduction
					Economic Rationale for Regulation
						Rationale for the Regulation of Financial Markets
					Regulation of Commerce
					Antitrust Regulation and Framework
					Classification of Regulations and Regulators
						Classification of Regulations and Regulators
					Regulatory Interdependencies
					Regulatory Tools
					Cost-Benefit Analysis
						Basic Concepts of Cost–Benefit Analysis
					Analysis of Regulation
						Assessment of the likelihood of regulatory change
						Assessment of the impact of regulatory change on a sector
					Summary
					Practice Problems
					Solutions
		Appendices
		Glossary
	Financial Statement Analysis
		Title Page
		Contents
		How to Use the CFA Program Curriculum vii
			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
		Financial Statement Analysis
			Study Session 4 Financial Statement Analysis (1)
				Reading 9 Intercorporate Investments
					Introduction
					Basic Corporate Investment Categories
					Investments In Financial Assets: IFRS 9
						Classification and Measurement
						Reclassification of Investments
					Investments In Associates And Joint Ventures: Equity Method of Accounting, Basis Principles
						Equity Method of Accounting: Basic Principles
					Investment Costs That Exceed the Book Value of the Investee, Amortization of Excess Purchase Price, Fair Value Option and Impairment
						Amortization of Excess Purchase Price
						Fair Value Option
						Impairment
					Transactions with Associates and Disclosure
						Disclosure
						Issues for Analysts
					Business Combinations: Acquisition Method and Impact of the Acquisition Method on Financial Statements Post-Acquisition
						Acquisition Method
						Impact of the Acquisition Method on Financial Statements, Post-Acquisition
					The Consolidation Process
						Business Combination with Less than 100% Acquisition
						Non-controlling (Minority) Interests: Balance Sheet
						Non-controlling (Minority) Interests: Income Statement
						Goodwill Impairment
					Financial Statement Presentation Subsequent to the Business Combination
					Variable Interest and Special Purpose Entities
						Securitization of Assets
					Additional Issues in Business Combinations That impair Comparability
						Contingent Assets and Liabilities
						Contingent Consideration
						In-Process R&D
						Restructuring Costs
					Summary
					Practice Problems
					Solutions
				Reading 10 Employee Compensation: Post-Employment and Share-Based
					Introduction
					Pensions and Other Post-Employment Benefits
						Types of Post-Employment Benefit Plans
					Measuring a Defined Benefit Pension Plan's Obligations
					Financial Statement Reporting of Pension Plans and Other Post-Employment Benefits: Defined Contribution Pension Plans
						Defined Contribution Pension Plans
					Financial Statement Reporting of Pension Plans: Balance Sheet Reporting for Defined Benefit Pension Plans
						Balance Sheet Presentation
					Financial Statement Reporting of Pension Plans: Periodic Pension Costs for Defined Benefit Pension Plans
					More on the Effect of Assumptions and Actuarial Gains and Losses on Pension and Other Post-Employment Benefit Costs
					Calculation of Defined Benefit Pension Obligation and Current Service Costs
					Disclosures of Pension and Other Post-Employment Benefits: Assumptions
						Assumptions
					Disclosures of Pension and Other Post-Employment Benefits: Net Pension Liability (or Asset) and Periodic Pension Costs
						Total Periodic Pension Costs
						Periodic Pension Costs Recognised in P&L vs. OCI
						Classification of Periodic Pension Costs Recognised in P&L
					Disclosures of Pension and Other Post-Employment Benefits: Cash Flow Information
					Share-Based Compensation
					Stock Grants
					Stock Options
					Other Types of Share -Based Compensation
					Summary
					Practice Problems
					Solutions
				Reading 11 Multinational Operations
					Introduction and Foreign Currency Transactions: Foreign Currency Transaction Exposure to Foreign Exchange Risk and Analytical Issues
						Foreign Currency Transactions
					Disclosures Related to Foreign Currency Transaction Gains and Losses
					Translation of Foreign Currency Financial Statements and Translation Conceptual Issues
						Translation Conceptual Issues
					Translation Methods
						Foreign Currency Is the Functional Currency
						Parent’s Presentation Currency Is the Functional Currency
						Translation of Retained Earnings
						Highly Inflationary Economies
					Illustration of Translation Methods (Excluding Hyperinflationary Economies)
						Translation Analytical Issues
						Translation When a Foreign Subsidiary Operates in an Hyperinflationary Economy
						Companies Use Both Translation Methods at the Same Time and Disclosures Related to Translation Methods
							Disclosures Related to Translation Methods
						Multinational Operations and a Company's Effective Tax Rate
						Additional Disclosures on the Effects of Foreign Currency
							Disclosures Related to Sales Growth
							Disclosures Related to Major Sources of Foreign Exchange Risk
						Summary
						Practice Problems
						Solutions
				Reading 12 Analysis of Financial Institutions
					Introduction to Financial Institutions
						What Makes Financial Institutions Different?
						Global Organizations
						Individual Jurisdictions’ Regulatory Authorities
					Analyzing a Bank: the CAMELS Approach
						The CAMELS Approach
					Analyzing a Bank: non-CAMELS Factors
						Banking-Specific Analytical Considerations Not Addressed by CAMELS
						Analytical Considerations Not Addressed by CAMELS That Are Also Relevant for Any Company
					Analyzing a Bank: Example of CAMELS Approach
						Capital Adequacy
						Asset Quality
						Management Capabilities
						Earnings
						Liquidity Position
						Sensitivity to Market Risk
						Overall CAMELS Assessment
					Analyzing Property and Casualty Insurance Companies
						Property and Casualty Insurance Companies
					Analyzing Life and Health Insurance Companies
						Life and Health Insurance Companies
					Summary
					Practice Problems
					Solutions
			Study Session 5 Financial Statement Analysis (2)
				Reading 13 Evaluating Quality of Financial Reports
					Introduction
					Quality of Financial Reports: Conceptual Framework
						Conceptual Framework for Assessing the Quality of Financial Reports
					Potential Problems that Affect the Quality of Financial Reports and Reported Amounts and Timing of Recognition
						Reported Amounts and Timing of Recognition
					Classification
					Quality Issues and Mergers and Acquisitions & Financial Reporting that Diverges from Economic Reality Despite Compliance with Accounting Rules
						Financial Reporting that Diverges from Economic Reality Despite Compliance with Accounting Rules
					Evaluating the Quality of Financial Reports: General Steps
						General Steps to Evaluate the Quality of Financial Reports
					Quantitative Tools to Assess the Likelihood of Misreporting
						Beneish Model
						Other Quantitative Models
						Limitations of Quantitative Models
					Earnings Quality Indicators and Recurring Earnings
						Indicators of Earnings Quality
					Earnings Persistence and Related Measures of Accruals
					Mean Reversion in Earnings, Beating Benchmarks and External Indicators of Poor-Quality Earnings
						Beating Benchmarks
						External Indicators of Poor-Quality Earnings
					Evaluating the Earnings Quality of a Company - Revenue Recognition Case: Sunbeam Corporation
						Revenue Recognition Case: Sunbeam Corporation
					Revenue Recognition Case: MicroStrategy, Inc.
						Multiple-Element Contracts
					Cost Capitalization Case: WorldCom Corp.
						Property/Capital Expenditures Analysis
					Bankruptcy Prediction Models: Altman Model, Developments in Bankruptcy Prediction Models
						Altman Model
						Developments in Bankruptcy Prediction Models
					Cash Flow Quality
						Indicators of Cash Flow Quality
						Evaluating Cash Flow Quality
					Balance Sheet Quality
					Sources of Information about Risk and Limited Usefulness of Auditor's Report
						Limited Usefulness of Auditor’s Opinion as a Source of Information about Risk
					Risk-Related Disclosures in the Notes
					Management Commentary (MD&A), Other Required Disclosures, Financial Press
						Other Required Disclosures
						Financial Press as a Source of Information about Risk
					Summary
					Practice Problems
					Solutions
				Reading 14 Integration of Financial Statement Analysis Techniques
					Introduction
					Case Study 1: Long -Term Equity Investment: Early Phases of the Analysis
						Phase 1: Define a Purpose for the Analysis
						Phase 2: Collect Input Data
					Phases 3 & 4: DuPont Analysis: Isolating "Pure Nestle"
						Phase 3: Process Data and Phase 4: Analyze/Interpret the Processed Data
					Phases 3 & 4: DuPont Decomposition
					Phases 3 & 4: Adjusting for Unusual Charges
					Phases 3 & 4: Asset Base Composition
						Asset Base Composition
					Phases 3 & 4: Capital Structure Analysis
						Capital Structure Analysis
					Phases 3 & 4: Segment Analysis: Earnings & Capital
						Segment Analysis and Capital Allocation
					Phases 3 & 4: Segment Analysis: Cash Flow & Capital
					Phases 3 & 4: Segment Analysis by Product Group
					Phases 3 & 4: Accruals and Earnings Quality
					Phases 3 & 4: Cash Flow Relationships
					Phases 3 & 4: Decomposition and Analysis of the Company's Valuation
					Phases 5 & 6: Develop and Communicate Conclusions and Recommendations and Follow-up
						Phase 5: Develop and Communicate Conclusions and Recommendations (e.g., with an Analysis Report)
						Phase 6: Follow-up
					Summary
					Practice Problems
					Solutions
		Glossary
	Corporate Issuers and Equity
		Title Page
		Contents
		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
		Corporate Issuers
			Study Session 6	Corporate Issuers (1)
				Reading 15	Capital Structure
					Introduction
					Modigliani-­Miller Proposition I without Taxes: Capital Structure Irrelevance
						Proposition I without Taxes: Capital Structure Irrelevance
					Modigliani-­Miller Proposition II without Taxes: Higher Financial Leverage Raises the Cost of Equity
					Modigliani-­Miller Propositions with Taxes: Taxes, Cost of Capital and Value of the Company
					Other Capital Structure Cost Considerations: Costs of Financial Distress
					Other Capital Structure Costs: Agency Costs and Costs of Asymmetric Information
						Costs of Asymmetric Information
					Optimal Capital Structure: Static Trade-­Off Theory
					Capital Structure Policy: Practical Issues and Evaluation
						Debt Ratings
						Evaluating Capital Structure Policy
					International Capital Structure Differences: Country-­specific Factors
						Institutional and Legal Environment
						Financial Markets and the Banking Sector
						Macroeconomic Environment
						Conclusions
					Summary
					Practice Problems
					Solutions
				Reading 16	Analysis of Dividends and Share Repurchases
					Dividends: Forms and Effects on Shareholder Wealth and Financial Ratios
						Dividends: Forms and Effects on Shareholder Wealth and Issuing Company’s Financial Ratios
					Dividend Policy and Company Value: Theory
						Dividend Policy Does Not Matter
						Dividend Policy Matters: The Bird in the Hand Argument
						Dividend Policy Matters: The Tax Argument
					Other Theoretical Issues: Clientele Effect and the Information Content of Dividend Actions: Signaling
						The Information Content of Dividend Actions: Signaling
						Agency Costs and Dividends as a Mechanism to Control Them
					Other Theoretical Issues: Agency Costs and Dividends as a Mechanism to Control Them and Dividend Theory: Summary
					Factors Affecting Dividend Policy in Practice
						Investment Opportunities
						The Expected Volatility of Future Earnings
						Financial Flexibility
						Tax Considerations
						Flotation Costs
						Contractual and Legal Restrictions
						Factors Affecting Dividend Policy: Summary
					Payout Policies
						Stable Dividend Policy
						Constant Dividend Payout Ratio Policy
						Global Trends in Payout Policy
					Share Repurchases, Methods and Financial Statement Effects
						Share Repurchase Methods
						Financial Statement Effects of Repurchases
					Valuation Equivalence of Cash Dividends and Share Repurchase: The Baseline
					The Dividend versus Share Repurchase Decision
					Analysis of Dividend Safety
					Summary
					Practice Problems
					Solutions
			Study Session 7	Corporate Issuers (2)
				Reading 17	Environmental, Social, and Governance (ESG) Considerations in Investment Analysis
					Introduction
					Ownership Structures and Their Effects on Corporate Governance
						Dispersed vs. Concentrated Ownership
						Conflicts within Different Ownership Structures
						Types of Influential Shareholders
						Effects of Ownership Structure on Corporate Governance
					Evaluating Corporate Governance Policies and Procedures
						Board Policies and Practices
						Executive Remuneration
						Shareholder Voting Rights
					Identifying ESG-­Related Risks and Opportunities
						Materiality and Investment Horizon
						Relevant ESG-­Related Factors
					Evaluating ESG-­Related Risks and Opportunities
						ESG Integration
						Examples of ESG Integration
					Summary
					Practice Problems
					Solutions
				Reading 18	Mergers and Acquisitions
					Introduction
					Mergers and Acquisitions: Definitions and Classifications
					Motives for Mergers
						Synergy
						Growth
						Increasing Market Power
						Acquiring Unique Capabilities and Resources
						Unlocking Hidden Value
						Tax Considerations
						Cross-­Border Motivations
						Diversification
						Managers’ Personal Incentives
						Bootstrapping Earnings
						Mergers and the Industry Life Cycle
					Merger Transaction Characteristics
						Form of Acquisition
						Method of Payment
						Mindset of Target Management
					Takeovers and Their Defense Mechanisms
						Pre-­Offer Takeover Defense Mechanisms
						Post-­Offer Takeover Defense Mechanisms
					Regulation and Competition Law
					Target Company Valuation: Discounted Cash Flow Analysis
						Target Company Valuation
					Target Company Valuation: Comparable Company and Comparable Transaction Analysis
						Comparable Transaction Analysis
					Merger Bid Analysis
					Benefits from Mergers
					Corporate Restructuring
					Summary
					Practice Problems
					Solutions
				Reading 19	Capital Budgeting
					Introduction
					Cash Flow Projections
						Table Format with Cash Flows Collected by Year
						Table Format with Cash Flows Collected by Type
						Equation Format for Organizing Cash Flows
						More on Cash Flow Projections
					Effects of Inflation on Capital Budgeting Analysis
					Project Analysis and Evaluation
						Mutually Exclusive Projects with Unequal Lives
						Capital Rationing
					Risk Analysis of Capital Investments - Stand Alone Methods
						Sensitivity Analysis
						Scenario Analysis
						Simulation (Monte Carlo) Analysis
					Real Options
					Common Capital Budgeting Pitfalls
					Summary
					Practice Problems
					Solutions
		Equity Valuation
			Study Session 8	Equity Valuation (1)
				Reading 20	Equity Valuation: Applications and Processes
					Introduction and Value Definitions
						Value Definitions and Valuation Applications
					Applications of Equity Valuation
					The Valuation Process, Understanding the Business and Industry and Competitive Analysis
						Understanding the Business
					Analysis of Financial Reports and Sources of Information
						Sources of Information
					Considerations in Using Accounting Information
					Forecasting Company Performance, Selecting the Appropriate Valuation Method, Absolute and Relative Valuation Models
						Selecting the Appropriate Valuation Model
					Valuation of the Total Entity and Its Components and Issues in Model Selection and Interpretation
						Issues in Model Selection and Interpretation
					Converting Forecasts to a Valuation and Applying the Valuation Conclusion: The Analyst's Role and Responsibilities
						Applying the Valuation Conclusion: The Analyst’s Role and Responsibilities
					Communicating Valuation Results
						Contents of a Research Report
						Format of a Research Report
						Research Reporting Responsibilities
					Summary
					Practice Problems
					Solutions
				Reading 21	Return Concepts
					Return Concepts
						Return Concepts
					Equity Risk Premium: Historical and Forward-­Looking Estimates
						Historical Estimates
						Forward-­Looking Estimates
					Capital Asset Pricing Model (CAPM)
						The Capital Asset Pricing Model
					Multifactor Models for Equity Return
						The Fama–French Model
						Extensions to the Fama–French Model
						Macroeconomic and Statistical Multifactor Models
						Build-­Up Method Estimates of the Required Return on Equity
						Build-­Up Approaches for Private Business Valuation
						Bond Yield Plus Risk Premium
						The Required Return on Equity: International Issues
					Weighted Average Cost of Capital (WACC)
						Discount Rate Selection in Relation to Cash Flows
					Summary
					Practice Problems
					Solutions
			Study Session 9	Equity Valuation (2)
				Reading 22	Industry and Company Analysis
					Introduction and Income Statement Modeling: Revenue
						Financial Modeling: An Overview
					Income Statement Modeling: Operating Costs
					Modeling Operating Costs: COGS and SG&A
						Selling, General, and Administrative Expenses
					Modeling Non-­operating Costs and Other Items
						Financing Expenses
						Corporate Income Tax
						Income Statement Modeling: Other Items
					Balance Sheet and Cash Flow Statement Modeling
					Scenario Analysis and Sensitivity Analysis
					The Impact of Competitive Factors in Prices and Costs
					Inflation and Deflation
						Sales Projections with Inflation and Deflation
						Cost Projections with Inflation and Deflation
					Technological Developments
					Long-­Term Forecasting
						Case Study: Estimating Normalized Revenue
					Building a Model: Industry Overview and Company Overview
						Industry Overview
						Company Overview
					Construction of Pro Forma Income Statement
						Revenue Forecast
						Cost of Goods Sold
						Selling, General, and Administrative (SG&A) Expenses
						Operating Profit by Division
						Non-­Operating Expenses
						Corporate Income Tax Forecast
					Construction of Pro Forma Cash Flow Statement and Balance Sheet and Valuation Inputs
						Capital Investments and Depreciation Forecasts
						Working Capital Forecasts
						Forecasted Cash Flow Statement
						Forecasted Balance Sheet
						Valuation Inputs
					Conclusions and Summary
					Practice Problems
					Solutions
				Reading 23	Discounted Dividend Valuation
					Introduction and Present Value Methods
						Present Value Models
					The Dividend Discount Model
						The Expression for a Single Holding Period
						The Expression for Multiple Holding Periods
					The Gordon Growth Model: The Gordon Growth Model Equation and chThe Links Among Dividend Growth, Earnings Growth, and Value Appreciation
						The Gordon Growth Model Equation
						The Links among Dividend Growth, Earnings Growth, and Value Appreciation in the Gordon Growth Model
					Share Repurchases and The Implied Dividend Growth Rate
						The Implied Dividend Growth Rate
					The Present Value of Growth Opportunities, Gordon Growth Model and the Price-­to-­Earnings Ratio, and Estimating a Required Return Using the Gordon Growth Model
						Gordon Growth Model and the Price-­to-­Earnings Ratio
						Estimating a Required Return Using the Gordon Growth Model
						The Gordon Growth Model: Concluding Remarks
					Multistage Dividend Discount Models: Two-­Stage Dividend Discount Model and Valuing a Non-­Dividend Paying Company
						Two-­Stage Dividend Discount Model
						Valuing a Non-­Dividend-­Paying Company
					The H-­Model and Three-­Stage Dividend Discount Models
						Three-­Stage Dividend Discount Models
					General Modeling and Estimating a Required Return Using Any DDM
						Estimating a Required Return Using Any DDM
						Multistage DDM: Concluding Remarks
					The Financial Determinants of Growth Rates: Sustainable Growth Rate and Dividend Growth Rate, Retention Rate, and ROE Analysis
						Sustainable Growth Rate
						Dividend Growth Rate, Retention Rate, and ROE Analysis
					Financial Models and Dividends
					Summary
					Practice Problems
					Solutions
		Glossary
	Equity and Fixed Income
		Title Page
		Contents
		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
		Equity Valuation
			Study Session 10	Equity Valuation (3)
				Reading 24	Free Cash Flow Valuation
					The Introduction to Free Cash Flows and FCFF and FCFE Valuation Approaches
						FCFF and FCFE Valuation Approaches
					Forecasting Free Cash Flow and Computing FCFF from Net Income
						Computing FCFF from Net Income
					Computing FCFF from the Statement of Cash Flows
					Additional Considerations in Computing FCFF
						Classification of Certain Items on the Statement of Cash Flow
						Adjustments to Derive Operating Cash Flow from Net Income
						Adjustments to Derive Operating Cash Flow from Net Income That May Merit Additional Attention from an Analyst
					Computing FCFE from FCFF
					Finding FCFF and FCFE from EBITA or EBITDA
					FCFF and FCFE on a Uses-­of-­Free-­Cash-­Flow Basis
					Forecasting FCFF and FCFE
					Other Issues in Free Cash Flow Analysis
						Analyst Adjustments to CFO
						Free Cash Flow versus Dividends and Other Earnings Components
						Free Cash Flow and Complicated Capital Structures
					Free Cash Flow Model Variations: An International Application of the Single-­Stage Model and Sensitivity Analysis of FCFF and FCFE Valuations
						An International Application of the Single-­Stage Model
						Sensitivity Analysis of FCFF and FCFE Valuations
					Two-­Stage Free Cash Flow Models
						Fixed Growth Rates in Stage 1 and Stage 2
						Declining Growth Rate in Stage 1 and Constant Growth in Stage 2
					Three-­Stage Free Cash Flow Models
					Integrating ESG in Free Cash Flow Models
					Non-­operating Assets and Firm Value
					Summary
					Practice Problems
					Solutions
				Reading 25	Market-­Based Valuation: Price and Enterprise Value Multiples
					Introduction to Market-­Based Valuation
						Price and Enterprise Value Multiples in Valuation
					Price to Earnings: the Basics
						Price to Earnings
					Price to Earnings: Valuation based on Forecasted Fundamentals
						Justified P/E
						Predicted P/E Based on Cross-­Sectional Regression
					Price-­Earnings: Using the P/E in Valuation
						Peer-­Company Multiples
						Industry and Sector Multiples
						Overall Market Multiple
						Own Historical P/E
						P/Es in Cross-­Country Comparisons
						Using P/Es to Obtain Terminal Value in Multistage Dividend Discount Models
					Price to Book Value
						Determining Book Value
						Valuation Based on Forecasted Fundamentals
						Valuation Based on Comparables
					Price to Sales
						Determining Sales
						Valuation Based on Forecasted Fundamentals
						Valuation Based on Forecasted Fundamentals
						Valuation Based on Comparables
					Price to Cash Flow
						Determining Cash Flow
						Valuation Based on Forecasted Fundamentals
						Valuation Based on Comparables
					Price to Dividends and Dividend Yield
						Calculation of Dividend Yield
						Valuation Based on Forecasted Fundamentals
						Valuation Based on Comparables
					Enterprise Value to EBITDA
						Enterprise Value to EBITDA
					Other Enterprise Value Multiples
						Enterprise Value to Sales
						Price and Enterprise Value Multiples in a Comparable Analysis: Some Illustrative Data
					International Considerations when Using Multiples
					Momentum Valuation Indicators
					Valuation Indicators: Issues in Practice
						Averaging Multiples: The Harmonic Mean
						Using Multiple Valuation Indicators
					Summary
					Practice Problems
					Solutions
				Reading 26	Residual Income Valuation
					Introduction and Residual Income
						Residual Income
					The Residual Income Model and The General Residual Income Model, and Fundamental Determinants of Residual Income
						The General Residual Income Model
						Fundamental Determinants of Residual Income
					Single-­Stage Residual Income Valuation and Multistage Residual Income Valuation
						Multistage Residual Income Valuation
					Residual Income Valuation in Relation to Other Approaches
						Strengths and Weaknesses of the Residual Income Model
						Broad Guidelines for Using a Residual Income Model
					Accounting and International Considerations and Violations of the Clean Surplus Relationship
						Violations of the Clean Surplus Relationship
					Accounting Considerations: Other
						Intangible Assets
						Non-­recurring Items
						Other Aggressive Accounting Practices
						International Considerations
					Summary
					Practice Problems
					Solutions
				Reading 27	Private Company Valuation
					Introduction, the Scope and Definitions of Private Company Valuation
						The Scope of Private Company Valuation
					Private Company Valuation Approaches, Earnings Normalization and Cash Flow Estimation Issues
						Earnings Normalization and Cash Flow Estimation Issues
					Income Approach Methods and Required Rate of Return: Models and Estimation Issues
						Required Rate of Return: Models and Estimation Issues
					Free Cash Flow, Capitalized Cash Flow and Excess Earnings Methods
						Capitalized Cash Flow Method
						Excess Earnings Method
					Market Approach Methods and the Guideline Public Company Method
						Guideline Public Company Method
					Guideline Transactions and Prior Transaction Methods
						Prior Transaction Method
					Asset Based Approach
					Valuation Discounts and Premiums
						Lack of Control Discounts
						Lack of Marketability Discounts
					Summary
					Practice Problems
					Solutions
		Fixed Income
			Study Session 11	Fixed Income (1)
				Reading 28	The Term Structure and Interest Rate Dynamics
					Spot Rates, Forward Rates, and the Forward Rate Model
						Spot Rates and Forward Rates
					Yield-­to-­Maturity in Relation to Spot and Forward Rates
						Yield Curve Movement and the Forward Curve
					Active Bond Portfolio Management
					The Swap Rate Curve
						Swap Rate Curve
						Why Do Market Participants Use Swap Rates When Valuing Bonds?
						How Do Market Participants Use the Swap Curve in Valuation?
					The Swap Spread and Spreads as a Price Quotation Convention
						Spreads as a Price Quotation Convention
					Traditional Theories of the Term Structure of Interest Rates
						Expectations Theory
						Liquidity Preference Theory
						Segmented Markets Theory
						Preferred Habitat Theory
					Yield Curve Factor Models
						A Bond’s Exposure to Yield Curve Movement
						Factors Affecting the Shape of the Yield Curve
					The Maturity Structure of Yield Curve Volatilities and Managing Yield Curve Risks
						Yield Volatility
						Managing Yield Curve Risks Using Key Rate Duration
					Developing Interest Rate Views Using Macroeconomic Variables
					Summary
					Practice Problems
					Solutions
				Reading 29	The Arbitrage-­Free Valuation Framework
					Introduction to Arbitrage-­Free Valuation
						The Meaning of Arbitrage-­Free Valuation
						The Law of One Price
						Arbitrage Opportunity
						Implications of Arbitrage-­Free Valuation for Fixed-­Income Securities
					Arbitrage-­Free Valuation for an Option-­Free Bond
						The Binomial Interest Rate Tree
					The Basics of Creating a Binomial Interest Rate Tree
						Determining the Value of a Bond at a Node
					Calibrating the Binomial Interest Rate Tree to the Term Structure
					Valuing an Option-­Free Bond with a Binomial Tree
					Valuing an Option-­Free Bond with Pathwise Valuation
					The Monte Carlo Method
					Term Structure Models
						Model Choice
						Equilibrium Models
						Arbitrage-­Free Models
						Modern Models
					Summary
					Practice Problems
					Solutions
			Study Session 12	Fixed Income (2)
				Reading 30	Valuation and Analysis of Bonds with Embedded Options
					Introduction and Overview of Embedded Options
						Overview of Embedded Options
					Valuation and Analysis of Callable and Putable Bonds
						Relationships between the Values of a Callable or Putable Bond, Straight Bond, and Embedded Option
						Valuation of Default-­Free and Option-­Free Bonds: A Refresher
						Valuation of Default-­Free Callable and Putable Bonds in the Absence of Interest Rate Volatility
					Effect of Interest Rate Volatility on the Value of Callable and Putable Bonds
						Interest Rate Volatility
						Level and Shape of the Yield Curve
					Valuation of Default-­Free Callable and Putable Bonds in the Presence of Interest Rate Volatility
						Valuation of a Callable Bond with Interest Rate Volatility
						Valuation of a Putable Bond with Interest Rate Volatility
					Valuation of Risky Callable and Putable Bonds
						Option-­Adjusted Spread
						Effect of Interest Rate Volatility on Option-­Adjusted Spread
					Bonds with Embedded Options: Effective Duration
						Duration
					One-­Sided and Key Rate Duration
						Key Rate Durations
					Effective Convexity
					Valuation and Analysis of Capped and Floored Floating-­Rate Bonds
						Valuation of a Capped Floater
						Valuation of a Floored Floater
					Valuation and Analysis of Convertible Bonds: Defining Features and Analysis of a Convertible Bond
						Defining Features of a Convertible Bond
						Analysis of a Convertible Bond
					Valuation of a Convertible Bond and Comparison of Risk–Return Characteristics
						Comparison of the Risk–Return Characteristics of a Convertible Bond, the Straight Bond, and the Underlying Common Stock
					Summary
					Practice Problems
					Solutions
				Reading 31	Credit Analysis Models
					Introduction
					Modeling Credit Risk and the Credit Valuation Adjustment
					Credit Scores and Credit Ratings
					Structural and Reduced-­Form Credit Models
					Valuing Risky Bonds in an Arbitrage-­Free Framework
					Interpreting Changes in Credit Spreads
					The Term Structure of Credit Spreads
					Credit Analysis for Securitized Debt
					Summary
					Practice Problems
					Solutions
				Reading 32	Credit Default Swaps
					Introduction
					Basic Definitions and Concepts
						Types of CDS
					Important Features of CDS Markets and Instruments, Credit and Succession Events, and Settlement Proposals
						Credit and Succession Events
						Settlement Protocols
						CDS Index Products
						Market Characteristics
					Basics of Valuation and Pricing
						Basic Pricing Concepts
						The Credit Curve and CDS Pricing Conventions
						CDS Pricing Conventions
						Valuation Changes in CDS during Their Lives
						Monetizing Gains and Losses
					Applications of CDS
						Managing Credit Exposures
					Valuation Differences and Basis Trading
					Summary
					Practice Problems
					Solutions
		Glossary
	Derivatives, Alternative investments, and Portfolio Management
		Title Page
		Contents
		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
		Derivatives
			Study Session 13	Derivatives
				Reading 33	Pricing and Valuation of Forward Commitments
					Introduction to Pricing and Valuation of Forward Commitments
						Principles of Arbitrage-­Free Pricing and Valuation of Forward Commitments
						Pricing and Valuing Generic Forward and Futures Contracts
					Carry Arbitrage
						Carry Arbitrage Model When There Are No Underlying Cash Flows
						Carry Arbitrage Model When Underlying Has Cash Flows
					Pricing Equity Forwards and Futures
						Equity Forward and Futures Contracts
						Interest Rate Forward and Futures Contracts
					Pricing Fixed-­Income Forward and Futures Contracts
						Comparing Forward and Futures Contracts
					Pricing and Valuing Swap Contracts
						Interest Rate Swap Contracts
					Pricing and Valuing Currency Swap Contracts
					Pricing and Valuing Equity Swap Contracts
					Summary
					Practice Problems
					Solutions
				Reading 34	Valuation of Contingent Claims
					Introduction and Principles of a No-­Arbitrage Approach to Valuation
						Principles of a No-­Arbitrage Approach to Valuation
					Binomial Option Valuation Model
					One-­Period Binomial Model
					Binomial Model: Two-­Period (Call options)
					Binomial Model: Two-­Period (Put options)
					Binomial Model: Two-­Period (Role of Dividends & Comprehensive Example)
					Interest Rate Options & Multiperiod Model
						Multiperiod Model
					Black-­Scholes-­Merton (BSM) Option Valuation Model, Introduction and Assumptions of the BSM Model
						Introductory Material
						Assumptions of the BSM Model
					BSM Model: Components
					BSM Model: Carry Benefits and Applications
					Black Option Valuation Model and European Options on Futures
						European Options on Futures
					Interest Rate Options
					Swaptions
					Option Greeks and Implied Volatility: Delta
						Delta
					Gamma
					Theta
					Vega
					Rho
					Implied Volatility
					Summary
					Practice Problems
					Solutions
		Alternative Investments
			Study Session 14	Alternative Investments
				Reading 35	Real Estate Investments
					Section A. Overview of Types of Real Estate Investment
					Introduction and Basic Forms of Real Estate Investment
						Real Estate Market Size
						Real Estate Investment: Basic Forms
						Characteristics
						Risk Factors
					Economic Value Drivers, Role in Portfolio, and Risk/Return of Real Estate Investments Relative to Stocks and Bonds
						Economic Drivers
						Role of Real Estate in an Investment Portfolio
						Real Estate Risk and Return Relative to Stocks and Bonds
						Classifications
						Investment Characteristics by Property Type
					Considerations in Analysis and Due Diligence
					Indexes
						Appraisal-­Based Indexes
						Transaction-­Based Indexes
						Advantages and Disadvantages of Appraisal-­Based and Transaction-­Based Indexes
						Real Estate Security Indexes
					Section B. Investments in Real Estate through Private Vehicles
					Introduction to Valuation Approaches
						Highest and Best Use
					The Income Approach to Valuation: Discount Rates and the Direct Capitalization of NOI and DCF Methods
						Similarities in Approaches
						The Direct Capitalization Method
					The DCF Method, the Relationship between Discount Rate and Cap Rate, and the Terminal Capitalization Rate
						The Relationship between the Discount Rate and the Cap Rate
						The Terminal Capitalization Rate
					Private Market Real Estate Debt
					Section C. Investments in Real Estate Through Publicly Traded Securities
					Types of Publicly Traded Real Estate Securities
						REIT Structures
						Market Size
						Benefits and Disadvantages of Investing in REITs
					Valuation: Net Asset Value Approach
						Accounting for Investment Properties
						Net Asset Value per Share: Calculation
						Net Asset Value per Share: Application
					Valuation: Relative Value (Price Multiple) Approach
						Relative Value Approach to Valuing REIT Stocks
						Funds from Operations and Adjusted Funds from Operations
						P/FFO and P/AFFO Multiples: Advantages and Drawbacks
					REIT Mini Case Study: Example of Disclosures and Valuation Analysis
						Selection of Valuation Methods
					Private vs. Public: A Comparison
					Summary
						General Characteristics of Real Estate
						Private Equity Real Estate
						Publicly Traded Real Estate Securities
					Practice Problems
					Solutions
				Reading 36	Private Equity Investments
					Introduction
					Introduction to Valuation Techniques in Private Equity Transactions
						How Is Value Created in Private Equity?
						Using Market Data in Valuation
					Contrasting Venture Capital and Buyout Investments
					LBO model for valuation of Buyout Transactions
						The LBO Model
					VC Method for valuation of Venture Capital Transactions
						Expected Exit Valuation
						Required Rate of Return
						Option Pools
						Stage Financing
					Exit Routes: Return Cash to Investors
						Exit Routes: Summary
					Risks and Costs of investing in Private Equity
						What Are the Risks and Costs of Investing in Private Equity?
					Private Equity Fund Structures and Terms
						Economic Terms
						Corporate Governance Terms
						Due Diligence Investigations by Potential Investors
						Private Equity Fund Valuation
					Evaluating Fund Performance and Concept in Action: Evaluating a Private Equity Fund
						Analysis of IRR since Inception
						Analysis of Return Multiples
						Concept in Action: Evaluating Private Equity Fund Performance
					Summary
					Practice Problems
					Solutions
				Reading 37	Introduction to Commodities and Commodity Derivatives
					Introduction
					Commodity Sectors
						Commodity Sectors
					Life Cycle of Commodities
						Energy
						Industrial/Precious Metals
						Livestock
						Grains
						Softs
					Valuation of Commodities
					Commodities Futures Markets: Participants
						Futures Market Participants
					Commodity Spot and Futures Pricing
					Theories of Futures Returns
						Theories of Futures Returns
					Components of Futures Returns
					Contango, Backwardation, and the Roll Return
					Commodity Swaps
						Total Return Swap
						Basis Swap
						Variance Swaps and Volatility Swaps
					Commodity Indexes
						S&P GSCI
						Bloomberg Commodity Index
						Deutsche Bank Liquid Commodity Index
						Thomson Reuters/CoreCommodity CRB Index
						Rogers International Commodity Index
						Rebalancing Frequency
						Commodity Index Summary
					Summary
					Practice Problems
					Solutions
		Portfolio Management
			Study Session 15	Portfolio Management (1)
				Reading 38	Exchange-­Traded Funds: Mechanics and Applications
					Introduction
					ETF Mechanics
						The Creation/Redemption Process
						Trading and Settlement
					Understanding ETFs
						Expense Ratios
						Index Tracking/Tracking Error
						Tax Issues
						ETF Trading Costs
						Total Costs of ETF Ownership
					ETF Risks
						Counterparty Risk
						Fund Closures
						Investor-­Related Risk
					ETFs in Portfolio Management
						ETF Strategies
						Efficient Portfolio Management
						Asset Class Exposure Management
						Active and Factor Investing
					Summary
					Practice Problems
					Solutions
				Reading 39	Using Multifactor Models
					Background and Uses of Multifactor Models
						Multifactor Models and Modern Portfolio Theory
					Arbitrage Pricing Theory and Multifactor Models
					Types of Multifactor Models
						Factors and Types of Multifactor Models
						The Structure of Fundamental Factor Models
						Fixed-­Income Multifactor Models
					Macroeconomic Factor Models
					Fundamental Factor Models
					Factor Models in Return Attribution
						Factor Models in Return Attribution
					Factor Models in Risk Attribution
					Factor Models in Portfolio Construction
					Factor Models in Strategic Portfolio Decisions
					Summary
					Practice Problems
					Solutions
				Reading 40	Measuring and Managing Market Risk
					Introduction, Understanding Value at Risk Value at Risk: Formal Definition
						Understanding Value at Risk
					Estimating VaR
					The Parametric Method of VaR Estimation
					The Historical Simulation Method of VaR Estimation
					The Monte Carlo Simulation Method of VaR Estimation
					Advantages and Limitations of VaR and Extensions of VaR
						Advantages of VaR
						Limitations of VaR
						Extensions of VaR
					Other Key Risk Measures - Sensitivity Risk Measures
						Sensitivity Risk Measures
					Scenario Risk Measures
						Historical Scenarios
						Hypothetical Scenarios
					Sensitivity and Scenario Risk Measures and VaR
						Advantages and Limitations of Sensitivity Risk Measures and Scenario Risk Measures
					Using Constraints in Market Risk Management
						Risk Budgeting
						Position Limits
						Scenario Limits
						Stop-­Loss Limits
						Risk Measures and Capital Allocation
					Applications of Risk Measures, Market Participants and the Different Risk Measures They Use
						Market Participants and the Different Risk Measures They Use
					Pension Funds and Insurers
						Insurers
					Summary
					Practice Problems
					Solutions
				Reading 41	Backtesting and Simulation
					Introduction
					The Objectives of Backtesting
					The Backtesting Process
						Step 1: Strategy Design
						Step 2: Historical Investment Simulation
						Step 3: Analysis of Backtesting Output
					Backtesting Multifactor Models
						Step 1: Strategy Design
						Step 2: Historical Investment Simulation
						Step 3: Output Analysis
					Commons Problems in Backtesting
						Survivorship Bias
						Look-­Ahead Bias
						Data Snooping
					Historical Scenario Analysis
					Simulation Analysis
						Historical Simulation
						Monte Carlo Simulation
					Sensitivity Analysis
					Summary
					Practice Problems
					Solutions
		Glossary
	Portfolio Management and Ethical and Professional Standards
		Title Page
		Contents
		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
		Portfolio Management
			Study Session 16 Portfolio Management (2)
				Reading 42 Economics and Investment Markets
					Introduction
					Framework for the Economic Analysis of Financial Markets: The Present Value Model
						The Present Value Model
					Expectations and Asset Values
					The Discount Rate on Real Default-Free Bonds: Real Default-Free Interest Rates
						Real Default-Free Interest Rates
					The Discount Rate on Real Default-Free Bonds: Uncertainty and Risk Premiums
					The Discount Rate on Real Default-Free Bonds: Risk Premiums on Risky Assets
					Default-Free Interest Rates and Economic Growth
					Real Default-Free Interest Rates and the Business Cycle
						Economic Growth and Real Yields
						Real Default-Free Interest Rate Summary
					The Yield Curve and the Business Cycle: Short-Term Nominal Interest Rates
						Short-Term Nominal Interest Rates and the Business Cycle
					Treasury Bills and the Business Cycle
						Short-Term Interest Rate Summary
					Conventional Government Bonds and Break-even Inflation Rates
						Break-Even Inflation Rates
					The Default-Free Yield Curve and the Business Cycle
					The Slope of the Yield Curve and the Term Spread
						The Term Spread and the Business Cycle
					Evidence on Risk Premiums for Default-Free Bonds
					Other Factors
					Credit Premiums and the Business Cycle
						Credit Spreads and the Credit Risk Premium
					Industry-Specific and Company-Specific Credit Quality
						Company-Specific Factors
					Sovereign Credit Risk
						Credit Premium Summary
					Equities and the Equity Risk Premium
						Equities and Bad Consumption Outcomes
					Earnings Growth and the Economic Cycle
					How Big is the Equity Risk Premium?
					Valuation Multiples
					Commercial Real Estate
						Regular Cash Flow from Commercial Real Estate Investments
						The Pricing Formula for Commercial Real Estate
					Commercial Real Estate and the Business Cycle
					Summary
					Practice Problems
					Solutions
				Reading 43 Analysis of Active Portfolio Management
					Introduction
					Active Management and Value Added
						Choice of Benchmark
						Measuring Value Added
						Decomposition of Value Added
					Comparing Risk and Return, The Sharpe Ratio and The Information Ratio
						The Sharpe Ratio
						The Information Ratio
					Constructing Optimal Portfolios
					Active Security Returns and The Basic Fundamental Law of Active Management
						Active Security Returns
						The Basic Fundamental Law
					The Full Fundamental Law, Ex Post Performance Measurement
						Ex Post Performance Measurement
					Applications of the Fundamental Law and Global Equity Strategy
						Global Equity Strategy
					Fixed-Income Strategies
					Practical Limitations
						Ex Ante Measurement of Skill
						Independence of Investment Decisions
					Summary
					Practice Problems
					Solutions
				Reading 44 Trading Costs and Electronic Markets
					Costs of Trading
						Costs of Trading
					Effective Spreads and Volume-Weighted Cost Estimates
						Implementation Shortfall
						VWAP Transaction Cost Estimates
					Development of Electronic Markets
						Electronic Trading
						Advantages of Electronic Trading Systems
						Electronification of Bond Markets
						Market Fragmentation
						Effects on Transaction Costs
					Types of Electronic Traders
						The Major Types of Electronic Traders
					Electronic Trading System: Characteristics and Uses
						Why Speed Matters
						Fast Communications
						Fast Computations
						Advanced Orders, Tactics, and Algorithms
						Select Examples of How Electronic Trading Changed Trading Strategies
					Electronic Trading Risks
						The HFT Arms Race
						Systemic Risks of Electronic Trading
					Detecting Abusive Trading Practices
					Summary
					Practice Problems
					Solutions
		Ethical and Professional Standards
			Study Session 17 Ethical and Professional Standards
				Reading 45 Code of Ethics and Standards of Professional Conduct
					Preface
						Evolution of the CFA Institute Code of Ethics and Standards of Professional Conduct
						Standards of Practice Handbook
						Summary of Changes in the Eleventh Edition
						CFA Institute Professional Conduct Program
						Adoption of the Code and Standards
						Acknowledgments
					Ethics and the Investment Industry
						Why Ethics Matters
					CFA Institute Code of Ethics and Standards of Professional Conduct
						Preamble
						The Code of Ethics
						Standards of Professional Conduct
				Reading 46 Guidance for Standards I–VII
					Standard I(A): Professionalism - Knowledge of the Law
						Standard I(A) Knowledge of the Law
						Guidance
					Standard I(A): Recommended Procedures
						Members and Candidates
						Distribution Area Laws
						Legal Counsel
						Dissociation
						Firms
					Standard I(A): Application of the Standard
						Example 1 (Notification of Known Violations):
						Example 2 (Dissociating from a Violation):
						Example 3 (Dissociating from a Violation):
						Example 4 (Following the Highest Requirements):
						Example 5 (Following the Highest Requirements):
						Example 6 (Laws and Regulations Based on Religious Tenets):
						Example 7 (Reporting Potential Unethical Actions):
						Example 8 (Failure to Maintain Knowledge of the Law):
					Standard I(B): Professionalism - Independence and Objectivity
						Guidance
					Standard I(B): Recommended Procedures
					Standard I(B): Application of the Standard
						Example 1 (Travel Expenses):
						Example 2 (Research Independence):
						Example 3 (Research Independence and Intrafirm Pressure):
						Example 4 (Research Independence and Issuer Relationship Pressure):
						Example 5 (Research Independence and Sales Pressure):
						Example 6 (Research Independence and Prior Coverage):
						Example 7 (Gifts and Entertainment from Related Party):
						Example 8 (Gifts and Entertainment from Client):
						Example 9 (Travel Expenses from External Manager):
						Example 10 (Research Independence and Compensation Arrangements):
						Example 11 (Recommendation Objectivity and Service Fees):
						Example 12 (Recommendation Objectivity):
						Example 13 (Influencing Manager Selection Decisions):
						Example 14 (Influencing Manager Selection Decisions):
						Example 15 (Fund Manager Relationships):
						Example 16 (Intrafirm Pressure):
					Standard I(C): Professionalism – Misrepresentation
						Guidance
					Standard I(C): Recommended Procedures
						Factual Presentations
						Qualification Summary
						Verify Outside Information
						Maintain Webpages
						Plagiarism Policy
					Standard I(C): Application of the Standard
						Example 1 (Disclosure of Issuer-Paid Research):
						Example 2 (Correction of Unintentional Errors):
						Example 3 (Noncorrection of Known Errors):
						Example 4 (Plagiarism):
						Example 5 (Misrepresentation of Information):
						Example 6 (Potential Information Misrepresentation):
						Example 7 (Plagiarism):
						Example 8 (Plagiarism):
						Example 9 (Plagiarism):
						Example 10 (Plagiarism):
						Example 11 (Misrepresentation of Information):
						Example 12 (Misrepresentation of Information):
						Example 13 (Avoiding a Misrepresentation):
						Example 14 (Misrepresenting Composite Construction):
						Example 15 (Presenting Out-of-Date Information):
						Example 16 (Overemphasis of Firm Results):
					Standard I(D): Professionalism – Misconduct
						Guidance
					Standard I(D): Recommended Procedures
					Standard I(D): Application of the Standard
						Example 1 (Professionalism and Competence):
						Example 2 (Fraud and Deceit):
						Example 3 (Fraud and Deceit):
						Example 4 (Personal Actions and Integrity):
						Example 5 (Professional Misconduct):
					Standard II(A): Integrity of Capital Markets - Material Nonpublic Information
						Standard II(A) Material Nonpublic Information
						Guidance
					Standard II(A): Recommended Procedures
						Achieve Public Dissemination
						Adopt Compliance Procedures
						Adopt Disclosure Procedures
						Issue Press Releases
						Firewall Elements
						Appropriate Interdepartmental Communications
						Physical Separation of Departments
						Prevention of Personnel Overlap
						A Reporting System
						Personal Trading Limitations
						Record Maintenance
						Proprietary Trading Procedures
						Communication to All Employees
					Standard II(A): Application of the Standard
						Example 1 (Acting on Nonpublic Information):
						Example 2 (Controlling Nonpublic Information):
						Example 3 (Selective Disclosure of Material Information):
						Example 4 (Determining Materiality):
						Example 5 (Applying the Mosaic Theory):
						Example 6 (Applying the Mosaic Theory):
						Example 7 (Analyst Recommendations as Material Nonpublic Information):
						Example 8 (Acting on Nonpublic Information):
						Example 9 (Mosaic Theory):
						Example 10 (Materiality Determination):
						Example 11 (Using an Expert Network):
						Example 12 (Using an Expert Network):
					Standard II(B): Integrity of Capital Markets - Market Manipulation
						Guidance
					Standard II(B): Application of the Standard
						Example 1 (Independent Analysis and Company Promotion):
						Example 2 (Personal Trading Practices and Price):
						Example 3 (Creating Artificial Price Volatility):
						Example 4 (Personal Trading and Volume):
						Example 5 (“Pump-Priming” Strategy):
						Example 6 (Creating Artificial Price Volatility):
						Example 7 (Pump and Dump Strategy):
						Example 8 (Manipulating Model Inputs):
						Example 9 (Information Manipulation):
					Standard III(A): Duties to Clients - Loyalty, Prudence, and Care
						Standard III(A) Loyalty, Prudence, and Care
						Guidance
					Standard III(A): Recommended Procedures
						Regular Account Information
						Client Approval
						Firm Policies
					Standard III(A): Application of the Standard
						Example 1 (Identifying the Client—Plan Participants):
						Example 2 (Client Commission Practices):
						Example 3 (Brokerage Arrangements):
						Example 4 (Brokerage Arrangements):
						Example 5 (Client Commission Practices):
						Example 6 (Excessive Trading):
						Example 7 (Managing Family Accounts):
						Example 8 (Identifying the Client):
						Example 9 (Identifying the Client):
						Example 10 (Client Loyalty):
						Example 11 (Execution-Only Responsibilities):
					Standard III(B): Duties to Clients - Fair Dealing
						Guidance
					Standard III(B): Recommended Procedures
						Develop Firm Policies
						Disclose Trade Allocation Procedures
						Establish Systematic Account Review
						Disclose Levels of Service
					Standard III(B): Application of the Standard
						Example 1 (Selective Disclosure):
						Example 2 (Fair Dealing between Funds):
						Example 3 (Fair Dealing and IPO Distribution):
						Example 4 (Fair Dealing and Transaction Allocation):
						Example 5 (Selective Disclosure):
						Example 6 (Additional Services for Select Clients):
						Example 7 (Minimum Lot Allocations):
						Example 8 (Excessive Trading):
						Example 9 (Limited Social Media Disclosures):
						Example 10 (Fair Dealing between Clients):
					Standard III(C): Duties to Clients – Suitability
						Guidance
					Standard III(C): Recommended Procedures
						Investment Policy Statement
						Regular Updates
						Suitability Test Policies
					Standard III(C): Application of the Standard
						Example 1 (Investment Suitability—Risk Profile):
						Example 2 (Investment Suitability—Entire Portfolio):
						Example 3 (IPS Updating):
						Example 4 (Following an Investment Mandate):
						Example 5 (IPS Requirements and Limitations):
						Example 6 (Submanager and IPS Reviews):
						Example 7 (Investment Suitability—Risk Profile):
						Example 8 (Investment Suitability):
					Standard III(D): Duties to Clients - Performance Presentation
						Guidance
					Standard III(D): Recommended Procedures
						Apply the GIPS Standards
						Compliance without Applying GIPS Standards
					Standard III(D): Application of the Standard
						Example 1 (Performance Calculation and Length of Time):
						Example 2 (Performance Calculation and Asset Weighting):
						Example 3 (Performance Presentation and Prior Fund/Employer):
						Example 4 (Performance Presentation and Simulated Results):
						Example 5 (Performance Calculation and Selected Accounts Only):
						Example 6 (Performance Attribution Changes):
						Example 7 (Performance Calculation Methodology Disclosure):
						Example 8 (Performance Calculation Methodology Disclosure):
					Standard III(E): Duties to Clients - Preservation of Confidentiality
						Guidance
					Standard III(E): Recommended Procedures
						Communicating with Clients
					Standard III(E): Application of the Standard
						Example 1 (Possessing Confidential Information):
						Example 2 (Disclosing Confidential Information):
						Example 3 (Disclosing Possible Illegal Activity):
						Example 4 (Disclosing Possible Illegal Activity):
						Example 5 (Accidental Disclosure of Confidential Information):
					Standard IV(A): Duties to Employers – Loyalty
						Standard IV(A) Loyalty
						Guidance
					Standard IV(A): Recommended Procedures
						Competition Policy
						Termination Policy
						Incident-Reporting Procedures
						Employee Classification
					Standard IV(A): Application of the Standard
						Example 1 (Soliciting Former Clients):
						Example 2 (Former Employer’s Documents and Files):
						Example 3 (Addressing Rumors):
						Example 4 (Ownership of Completed Prior Work):
						Example 5 (Ownership of Completed Prior Work):
						Example 6 (Soliciting Former Clients):
						Example 7 (Starting a New Firm):
						Example 8 (Competing with Current Employer):
						Example 9 (Externally Compensated Assignments):
						Example 10 (Soliciting Former Clients):
						Example 11 (Whistleblowing Actions):
						Example 12 (Soliciting Former Clients):
						Example 13 (Notification of Code and Standards):
						Example 14 (Leaving an Employer):
						Example 15 (Confidential Firm Information):
					Standard IV(B): Duties to Employers - Additional Compensation Arrangements
						Guidance
					Standard IV(B): Recommended Procedures
					Standard IV(B): Application of the Standard
						Example 1 (Notification of Client Bonus Compensation):
						Example 2 (Notification of Outside Compensation):
						Example 3 (Prior Approval for Outside Compensation):
					Standard IV(C): Duties to Employers - Responsibilities of Supervisors
						Guidance
					Standard IV(C): Recommended Procedures
						Codes of Ethics or Compliance Procedures
						Adequate Compliance Procedures
						Implementation of Compliance Education and Training
						Establish an Appropriate Incentive Structure
					Standard IV(C): Application of the Standard
						Example 1 (Supervising Research Activities):
						Example 2 (Supervising Research Activities):
						Example 3 (Supervising Trading Activities):
						Example 4 (Supervising Trading Activities and Record Keeping):
						Example 5 (Accepting Responsibility):
						Example 6 (Inadequate Procedures):
						Example 7 (Inadequate Supervision):
						Example 8 (Supervising Research Activities):
						Example 9 (Supervising Research Activities):
					Standard V(A): Investment Analysis, Recommendations, and Actions - Diligence and Reasonable Basis
						Standard V(A) Diligence and Reasonable Basis
						Guidance
					Standard V(A): Recommended Procedures
					Standard V(A): Application of the Standard
						Example 1 (Sufficient Due Diligence):
						Example 2 (Sufficient Scenario Testing):
						Example 3 (Developing a Reasonable Basis):
						Example 4 (Timely Client Updates):
						Example 5 (Group Research Opinions):
						Example 6 (Reliance on Third-Party Research):
						Example 7 (Due Diligence in Submanager Selection):
						Example 8 (Sufficient Due Diligence):
						Example 9 (Sufficient Due Diligence):
						Example 10 (Sufficient Due Diligence):
						Example 11 (Use of Quantitatively Oriented Models):
						Example 12 (Successful Due Diligence/Failed Investment):
						Example 13 (Quantitative Model Diligence):
						Example 14 (Selecting a Service Provider):
						Example 15 (Subadviser Selection):
						Example 16 (Manager Selection):
						Example 17 (Technical Model Requirements):
					Standard V(B): Investment Analysis, Recommendations, and Actions - Communication with Clients and Prospective Clients
						Guidance
					Standard V(B): Recommended Procedures
					Standard V(B): Application of the Standard
						Example 1 (Sufficient Disclosure of Investment System):
						Example 2 (Providing Opinions as Facts):
						Example 3 (Proper Description of a Security):
						Example 4 (Notification of Fund Mandate Change):
						Example 5 (Notification of Fund Mandate Change):
						Example 6 (Notification of Changes to the Investment Process):
						Example 7 (Notification of Changes to the Investment Process):
						Example 8 (Notification of Changes to the Investment Process):
						Example 9 (Sufficient Disclosure of Investment System):
						Example 10 (Notification of Changes to the Investment Process):
						Example 11 (Notification of Errors):
						Example 12 (Notification of Risks and Limitations):
						Example 13 (Notification of Risks and Limitations):
						Example 14 (Notification of Risks and Limitations):
					Standard V(C): Investment Analysis, Recommendations, and Actions - Record Retention
						Guidance
					Standard V(C): Recommended Procedures
					Standard V(C): Application of the Standard
						Example 1 (Record Retention and IPS Objectives and Recommendations):
						Example 2 (Record Retention and Research Process):
						Example 3 (Records as Firm, Not Employee, Property):
					Standard VI(A): Conflicts of Interest - Disclosure of Conflicts
						Standard VI(A) Disclosure of Conflicts
						Guidance
					Standard VI(A): Recommended Procedures
					Standard VI(A): Application of the Standard
						Example 1 (Conflict of Interest and Business Relationships):
						Example 2 (Conflict of Interest and Business Stock Ownership):
						Example 3 (Conflict of Interest and Personal Stock Ownership):
						Example 4 (Conflict of Interest and Personal Stock Ownership):
						Example 5 (Conflict of Interest and Compensation Arrangements):
						Example 6 (Conflict of Interest, Options, and Compensation Arrangements):
						Example 7 (Conflict of Interest and Compensation Arrangements):
						Example 8 (Conflict of Interest and Directorship):
						Example 9 (Conflict of Interest and Personal Trading):
						Example 10 (Conflict of Interest and Requested Favors):
						Example 11 (Conflict of Interest and Business Relationships):
						Example 12 (Disclosure of Conflicts to Employers):
					Standard VI(B): Conflicts of Interest - Priority of Transactions
						Guidance
					Standard VI(B): Recommended Procedures
					Standard VI(B): Application of the Standard
						Example 1 (Personal Trading):
						Example 2 (Trading for Family Member Account):
						Example 3 (Family Accounts as Equals):
						Example 4 (Personal Trading and Disclosure):
						Example 5 (Trading Prior to Report Dissemination):
					Standard VI(C): Conflicts of Interest - Referral Fees
						Guidance
					Standard VI(C): Recommended Procedures
					Standard VI(C): Application of the Standard
						Example 1 (Disclosure of Referral Arrangements and Outside Parties):
						Example 2 (Disclosure of Interdepartmental Referral Arrangements):
						Example 3 (Disclosure of Referral Arrangements and Informing Firm):
						Example 4 (Disclosure of Referral Arrangements and Outside Organizations):
						Example 5 (Disclosure of Referral Arrangements and Outside Parties):
					Standard VII(A): Responsibilities as a CFA Institute Member or CFA
						Candidate - Conduct as Participants in CFA Institute Programs
						Standard VII(A) Conduct as Participants in CFA Institute Programs
						Guidance
					Standard VII(A): Application of the Standard
						Example 1 (Sharing Exam Questions):
						Example 2 (Bringing Written Material into Exam Room):
						Example 3 (Writing after Exam Period End):
						Example 4 (Sharing Exam Content):
						Example 5 (Sharing Exam Content):
						Example 7 (Discussion of Exam Grading Guidelines and Results):
							Example 6 (Sharing Exam Content):
						Example 8 (Compromising CFA Institute Integrity as a Volunteer):
						Example 9 (Compromising CFA Institute Integrity as a Volunteer):
					Standard VII(B): Responsibilities as a CFA Institute Member or CFA Candidate - Reference to CFA Institute, the CFA Designation, and the CFA Program
						Guidance
					Standard VII(B): Recommended Procedures
					Standard VII(B): Application of the Standard
						Example 1 (Passing Exams in Consecutive Years):
						Example 2 (Right to Use CFA Designation):
						Example 3 (“Retired” CFA Institute Membership Status):
						Example 4 (Stating Facts about CFA Designation and Program):
						Example 5 (Order of Professional and Academic Designations):
						Example 6 (Use of Fictitious Name):
					Practice Problems
					Solutions
				Reading 47 Application of the Code and Standards: Level II
					Introduction
					Serengeti Advisory Services
						Case Questions
					Banco Libertad
						Case Questions
					Quanthouse
						Case Questions
					JR and Associates
						Case Questions
					Magadi Asset Management
						Case Questions
					Edvard Stark
						Duties to Clients
						Duties to Employers
						Investment Analysis, Recommendations, and Actions
						Conflicts of Interest
					Subath Agarway
						Professionalism
						Conflicts of Interest
		Glossary
	EULA