Break through for the 2014

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1 Break through for the 2014 CFA Level II Exam

2 Agenda CFA Exam Fast Facts & Challenges Why Candidates Fail? Exam Forecast & Program Highlights Q&A

3 Few while important words to L2 Candidates CFA Level 2 Exam is challenging but not that threatening Simply pyreading Schweser Notes will not be 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

4 Level II Challenges

5 Why Level II is a big Challenge Perspective from the Pass Rates Year Level 2 Pass Rate (Exam Actually Taken) 56% 48% 40% 46% 41% 39% % %

6 Why Level II is a big Challenge Perspective from the Pass Rates Around 40% recently

7 Body of Knowledge Ethical and Professional Standards Quantitative Methods Economics Financial Statement Analysis Corporate Finance Analysis of Equity Investments Analysis of Debt Investments Analysis of Derivatives Analysis of Alternative Investments Investment Tools Asset Valuation Portfolio Management and Performance Presentation Portfolio Management

9 考试内容

10 Why Level II is a big Challenge Perspective from the Content Exam Topic Focus Learning Focus Level I Investment Knowledge Tools and Ethical Standards ds Level II Asset Application Valuation and Ethical Standards Level III Portfolio Synthesis and Management Ethical Standards

11 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 el 1 command words: define, explain, describe, calculate Level 2 command words: analyze, formulate, evaluate, contrast, modify, demonstrate, illustrate Questions can address combined LOS

12 2013 Level 2 Exam Format 120 selected response questions (more commonly known as multiple choice) Grouped into six-question item sets 1 minute = 1 point; 3 minutes per question; 18 minutes per item set; 360 minutes (6 hours) for exam 60 Q s Qs (10 item sets) in 3-hour AM session 60 Q s (10 item sets) in 3-hour PM session

13 2013 Topic Area Weights Topic % Item Sets Ethics 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

14 Exam Major Focus - Cannot follow? Do not Worry, will covered during revision course

15 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) Also includes Prudent Investor Rule, Soft Dollar Standards, and Research Objectivity Standards d

16 Ethics The most important topics are (1) soft dollars arrangements, (2) fiduciary i duties (including the prudent man vs. prudent investor rules), and d(3)r Research hobjective Standard. d However, in one item set you must be well acquainted with the Standards of Professional Conduct. Be ready for a random sampling of topics.

17 Quant (1-2 Item Sets) Correlation Analysis (Simple 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 time periods; e.g. monthly stock returns, quarterly revenue data)

18 Economics (1-2 Item Sets) Currency Exchange 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

19 Financial Statement Analysis (3-5 Item Sets) Inventory Valuation and Long-term Asset Intercorporate Investment (Cost method vs equity method vs consolidation vs proportionate p consolidation) Employee compensation:defined contribution plan, defined benefit plan; share based compensation Multinational Operations: FX translation Earnings Quality and sustainable cash flow Integration of Financial Statement Analysis Techniques

20 Corporate Finance (1-3 Item Sets) Capital Budgeting g (evaluating projects with NPV) Capital Structure (optimal capital structure; lots of theory) Dividend Policy (optimal dividend policy) and Share Repurchase analysis Corporate Governance Merger and Acquisitions (Quantitative Questions)

21 Equity (4-6 Item Sets) Equity Valuation: Applications and Processes Return Concepts Porter s Competitive Strategy Model Your strategy needs a strategy(new) Industry and company 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

22 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. 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

23 Fixed Income (1-3 Item Sets) Credit analysis models (modified) Term Structure Theories Valuing Callable, Puttable, Convertible bonds (the binomial model) Mortgage-backed and Asset-backed Securities (different types of MBS and ABS and their features) Valuing Mortgage-Backed and Asset-Backed Securities

24 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)

25 Portfolio Management (1-3 Item Sets) Portfolio concepts: 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 Management Process (intro to Level 3)

26 Solution to Success: Find An Effective Study Strategy

27 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 purchase

28 Study Approach 1. Attend class and make notes in slide packs 2. Practice questions in the 3. slide packs 4. Practice Mock Exams 3. Work through study material further annotating slide packs

29 Mock Exam & Review Target important t BOK Dry run for the real exam Find weak areas Focus additional review Time management and techniques

30 The End! Q&A

The Master of Science in Finance (English Program) - MSF. Department of Banking and Finance. Chulalongkorn Business School. Chulalongkorn University

The Master of Science in Finance (English Program) - MSF Department of Banking and Finance Chulalongkorn Business School Chulalongkorn University Overview of Program Structure Full Time Program: 1 Year