Break through for the 2014 CFA Level II Exam
Agenda CFA Exam Fast Facts & Challenges Why Candidates Fail? Exam Forecast & Program Highlights Q Q&A
Few while important words to L2 Candidates CFA Level 2 Exam is challenging but not that threatening p y reading g Schweser Notes will not be Simply sufficient enough to pass the exams Having a big picture in your mind is very necessary After studying level two you are equivalent to a finance master degree graduate Let’s get the ball running
Level II Challenges
Why Level II is a big Challenge Perspective from the Pass Rates Year
Level 2 Pass Rate (Exam Actually Taken)
2005 2006 2007 2008 2009 2010
56% 48% 40% 46% 41% 39%
2011 2012
43% 42%
Why Level II is a big Challenge Perspective from the Pass Rates
Around 40% recently
Body of Knowledge • Ethical and Professional Standards • Quantitative Q tit ti Methods M th d • Economics • Financial Statement Analysis • Corporate Finance
Investment Tools
• Analysis of Equity Investments • Analysis of Debt Investments • Analysis of Derivatives • Analysis of Alternative Investments
Asset Valuation
•
Portfolio Management and Performance Presentation
Portfolio P tf li Management
考试内容
Why Level II is a big Challenge Perspective from the Content Exam
Topic Focus
Learning Focus
Level I
Investment Tools oo s
Knowledge and a d Ethical t ca Sta Standards da ds
Level II
Asset Valuation
Application pp and Ethical Standards
Level III
Portfolio Management
Synthesis and Ethical Standards
Why Level II is a big Challenge Perspective from the Exam Format How is Level 2 Different from Level 1? Level 1 is “building block” for Level 2 (like a prerequisite for a university course) Level Le el 1 command words: ords “define “define,”” “e “explain,” plain ” “describe “describe,”” “calculate” Level 2 command words: “analyze,” analyze, “formulate,” formulate, “evaluate,” evaluate, “contrast,” “modify,” “demonstrate,” “illustrate” Questions can address combined LOS
2013 Level 2 Exam Format 120 “selected response” questions (more commonly known as multiple choice) Grouped into six-question “item sets” 1 minute i t = 1 point; i t 3 minutes i t per question; ti 18 minutes i t per item set; 360 minutes (6 hours) for exam 60 Q’s Q s (10 item sets) in 3-hour AM session 60 Q’s (10 item sets) in 3-hour PM session
2013 Topic Area Weights
Topic p
%
Item Sets
10%
2
Quantitative Methods
5 - 10%
1-2
Economics
5 - 10%
1-2
Financial Statement Analysis
15 - 25%
3-5
Corporate Finance
5 - 15%
1-3
Equity
20 - 30%
4-6
Fixed Income
5 - 15%
1-3
Derivatives
5 - 15%
1-3
Alternative Investments
5 - 15%
1-3
Portfolio Management
5 - 15%
1-3
Ethics
Exam Major Focus - Cannot follow? Do not Worry, will covered during revision course
Exam Forecast: Ethics (2 Item Sets)
Standards of Practice is the same as Level 1 (and this is also the key to success at Level 2) Al Also iincludes l d P Prudent d t IInvestor t R Rule, l S Soft ft Dollar Standards, and Research Objectivity St d d Standards
Ethics The most important topics are (1) soft dollars arrangements, t (2) fid fiduciary i d duties ti (i (including l di the prudent man vs. prudent investor rules), and d (3) R Research h Obj Objective ti St Standard. d d However, in one item set you must be well acquainted q with the Standards of Professional Conduct. Be ready for a random sampling of topics. p
Quant (1 - 2 Item Sets) Correlation Analysis y ((Simple p and Straightforward) Simple Linear regression with one independent variable (the basics) Multiple Regression with more than one independent variable (basics again plus model misspecification and problems with regression) Time Series Analysis (observations over successive i ti time periods; i d e.g. monthly thl stock t k returns, quarterly revenue data)
Economics (1 - 2 Item Sets) Currencyy Exchange g Rate determination and forecasting International Finance (FX markets, Spot Vs Forward, parity conditions, arbitrage) Balance of Payment Carry Trade Monetary and Fiscal policies on exchange rate
Determinants of Economic growth Growth Theories
Government Regulation
Financial Statement Analysis (3 - 5 Item Sets) Inventory Valuation and Long-term Asset Intercorporate Investment (Cost method vs equity q y method vs consolidation vs p proportionate p consolidation) Employee compensation：Defined contribution plan, defined benefit plan; share based compensation Multinational Operations: FX translation Earnings E i Q Quality lit and d sustainable t i bl cash h flflow Integration of Financial Statement Analysis Techniques
Corporate Finance (1 - 3 Item Sets) Capital p Budgeting g g ((evaluating gp projects j with NPV) Capital Structure (optimal capital structure; lots of theory) Dividend Policy (optimal dividend policy) and Share Repurchase analysis Corporate C t Governance G Merger and Acquisitions (Quantitative Questions)
Equity (4 - 6 Item Sets)
Equity Valuation: Applications and Processes Return Concepts Porter’s Competitive Strategy Model Your strategy needs a strategy(new) y ( ) Industryy and companyy analysis(new) Dividend Discount Models Free cash Flow Models Market-Based Valuation: Price and Enterprise Value Multiples Residual Income Model and EVA Private Company Valuation
Alternative Investments (1 - 2 Item Sets)
Private Real Estate Investments Publicly Traded Real Estate Securities Private Equity Valuation Investing in Hedge Funds: A Survey A primer on commodity investing (new)
There are basically two things you can see here here. The first is venture capital. The likely scenario is a question from the viewpoint of a pension fund portfolio manager. The second possible topic is real estate. In real estate, you will see either a numerical real estate valuation problem or discussion problem of the value of real estate as a diversification tool for an equity portfolio. Be ready for either
Fixed Income (1 - 3 Item Sets) Credit analysis models (modified) Term Structure Theories Callable Puttable Puttable, Convertible bonds Valuing Callable, (the binomial model) Mortgage-backed Mortgage backed and Asset Asset-backed backed Securities (different types of MBS and ABS and their features) Valuing Mortgage-Backed and Asset-Backed S Securities iti
Derivatives (1 - 3 Item Sets) Valuation of:
Forward Markets and Contracts Futures Markets and Contracts Options Markets and Contracts Swaps Markets and Contracts Interest Rate Derivative Instruments
Credit Default Swaps (modified)
Portfolio Management (1 - 3 Item Sets) Portfolio concepts: p CAPM and APT,, Multi-Factor Models Residual Risk and Return: The Information Ratio (new) The Fundamental Law of Active Management (Treynor-Black model) (modified) Portfolio P tf li Management M t Process P (intro (i t to t Level L l 3)
Solution to Success: Find An Effective Study y Strategy gy
Points about The CFAI Curriculum Book
Remember: •
They are not Schweser Study Notes - Repackaged textbook readings as set by CFA Institute - Equally voluminous and unwieldy as previous volumes,, which used to be for separate p p purchase
Study Approach
1. Attend class and make notes in slide packs
4. Practice Mock Exams
2. Practice questions in the 3 slide 3. lid packs k
3. Work through study material further annotating slide packs
Mock Exam & Review
•
T Target t important i t t BOK
•
Dry run for the real exam
•
Find weak areas
•
Focus additional review
•
Time management and techniques
The End！ Q Q&A
