Ethical and Professional Standards

Transcription

1 STUDY SESSION 1 Etil n Prossionl Stnrs T rins in tis stuy sssion prsnt rmwork or til onut in t invstmnt prossion y ousin on t CFA Institut Co o Etis n Stnrs o Prossionl Conut (t Co n Stnrs) s wll s t CFA Institut Rsr Ojtivity Stnrs. T prinipls n uin prsnt in t CFA Institut Stnrs o Prti Hnook (Hnook) orm t sis or t CFA Institut sl- rultory prorm to mintin t ist prossionl stnrs mon invstmnt prtitionrs. A lr unrstnin o t CFA Institut Co o Etis n Stnrs o Prossionl Conut (ot oun in t Hnook) soul llow t prtitionr to intiy n ppropritly rsolv til onlits. T rsultin ronition or intrity soul nit ot t iniviul n t prossion. Guin in t Hnook rsss t prtil pplition o t Co o Etis n Stnrs o Prossionl Conut. T uin rviws t purpos n sop o Stnr, prsnts rommn prours or omplin, n provis xmpls o t Stnr in prti. T CFA Institut Rsr Ojtivity Stnrs rss ontmporry issus or wi CFA Institut s liv urtr, mor spii uin is wrrnt. It is onsistnt wit n omplmnt to t CFA Institut Co o Etis n Stnrs o Prossionl Conut. Invstmnt rsr ojtivity soul t loil onsqun o til onut, onsistnt wit t CFA Institut Co o Etis n Stnrs o Prossionl Conut, in wi lint intrsts r pl irst n onlits o intrst r ully islos. Wn tmpttion or prssur ls to is or mislin rsr rports, t intrity o ll innil prossionls is tint. T CFA Institut Rsr Ojtivity Stnrs prsnt spii poliis n prours sin to rt rsr nvironmnt in wi onlits o intrsts n opportunitis or til lpss r minimiz n islos Lvl II CFA Prorm Curriulum CFA Institut.

2 Stuy Sssion 1 2 READING ASSIGNMENTS Rin 1 Rin 2 Rin 3 Co o Etis n Stnrs o Prossionl Conut Stnrs o Prti Hnook, Elvnt Eition Guin or Stnrs I VII Stnrs o Prti Hnook, Elvnt Eition CFA Institut Rsr Ojtivity Stnrs LEARNING OUTCOMES READING 1. CODE OF ETHICS AND STANDARDS OF PROFESSIONAL CONDUCT sri t six omponnts o t Co o Etis n t svn Stnrs o Prossionl Conut; xplin t til rsponsiilitis rquir o CFA Institut mmrs n nits in t CFA Prorm y t Co n Stnrs. READING 2. GUIDANCE FOR STANDARDS I VII monstrt torou knowl o t Co o Etis n Stnrs o Prossionl Conut y pplyin t Co n Stnrs to spii situtions; rommn prtis n prours sin to prvnt violtions o t Co o Etis n Stnrs o Prossionl Conut. READING 3. CFA INSTITUTE RESEARCH OBJECTIVITY STANDARDS xplin t ojtivs o t Rsr Ojtivity Stnrs; vlut ompny poliis n prtis rlt to rsr ojtivity, n istinuis twn ns rquir n ns rommn or omplin wit t Rsr Ojtivity Stnrs Lvl II CFA Prorm Curriulum CFA Institut.

3 STUDY SESSION 2 Etil n Prossionl Stnrs Applition Tis stuy sssion uss s stuis s n i to unrstnin n intrnlizin t vlus n stnrs prsnt in t CFA Institut Co o Etis n Stnrs o Prossionl Conut. T ss prsnt rlisti ut itionl situtions tt losly pproximt ow iniviuls prtiin in t invstmnt inustry nountr til issus in tir y- to- y tivitis. T isussions ollowin s intiy ky violtions o t Stnrs o Prossionl Conut, rommn orrtiv tions, n, wn pproprit, prsnt poliy sttmnts irm oul us in skin to prvnt t violtions. T Stnrs Rportr rins prsnt rultory tions tkn in rspons to tul ss o violtions n xplin ow t violtions woul viw rom t prsptiv o t Co o Etis n Stnrs o Prossionl Conut. Wispr ronition xists tt rtin situtions rt rltionsip in wi n lvt lvl o ility, u ilin, n prun is rquir o t invstmnt mnr. Historilly, t trm iuiry s n in in ountry- spii lws n rultions, mkin nri initions iiult. READING ASSIGNMENTS Rin 4 Rin 5 Rin 6 Rin 7 Rin 8 T Glnrm Compny Etis Css Prston Prtnrs Etis Css Supr Sltion Etis Css Tr Allotion: Fir Dlin n Dislosur Stnrs Rportr Cnin Invstmnt Ojtivs Stnrs Rportr 2015 Lvl II CFA Prorm Curriulum CFA Institut.

4 Stuy Sssion 2 2 LEARNING OUTCOMES READING 4. THE GLENARM COMPANY vlut t prtis n poliis prsnt; xplin t pproprit tion to tk in rspons to onut tt violts t CFA Institut Co o Etis n Stnrs o Prossionl Conut. READING 5. PRESTON PARTNERS vlut t prtis n poliis prsnt; xplin t pproprit tion to tk in rspons to onut tt violts t CFA Institut Co o Etis n Stnrs o Prossionl Conut. READING 6. SUPER SELECTION vlut t prtis n poliis prsnt; xplin t pproprit tion to tk in rspons to onut tt violts t CFA Institut Co o Etis n Stnrs o Prossionl Conut. READING 7. TRADE ALLOCATION: FAIR DEALING AND DISCLOSURE vlut tr llotion prtis, n trmin wtr ty omply wit t CFA Institut Stnrs o Prossionl Conut rssin ir lin n lint loylty; sri pproprit tions to tk in rspons to tr llotion prtis tt o not qutly rspt lint intrsts. READING 8. CHANGING INVESTMENT OBJECTIVES vlut t islosur o invstmnt ojtivs n si poliis, n trmin wtr ty omply wit t CFA Institut Stnrs o Prossionl Conut; sri pproprit tions n to nsur qut islosur o t invstmnt pross Lvl II CFA Prorm Curriulum CFA Institut.

5 STUDY SESSION 3 Quntittiv Mtos or Vlution Tis stuy sssion ins wit isussion o linr orrltion n tn ouss on linr rrssion, on o t most wily us sttistil tniqus in innil molin. In ition to isussion o uilin n intrprtin multipl rrssion mols, t rins prsnt inormtion out tstin t siniin o t stimt prmtrs n trminin t vliity o t ssum rrssion mol. It is importnt to unrstn t ssumptions in t strutur o rrssion mols, to mk orrtions i t osrv vrils o not xiit t ssum proprtis, n to voi misspiition o t mols. Tim- sris nlysis is us to sri t ynmi vior o n onomi or innil vril, to orst its utur vlus, n to tt rltions twn t tim sris o irnt vrils. In, rrssion mols must trt witin tim- sris ontxt i t vrils r msur ovr tim. Rrssion rports or su mols soul inlu stnr tim- sris tsts to nsur tt t rsults o t rrssion r intrprt orrtly. In ny pplition, t stistion o mol ssumptions n t onsquns o mol misspiition must onsir. In ition to ovrin t ov topis, t rin rsss tim- sris proprtis, inluin sttionrity n mn rvrsion, tt r importnt in mny invstmnt ontxts Lvl II CFA Prorm Curriulum CFA Institut.

6 Stuy Sssion 3 2 READING ASSIGNMENTS Rin 9 Rin 10 Rin 11 Corrltion n Rrssion Quntittiv Mtos or Invstmnt Anlysis, Son Eition, y Rir A. DFuso, CFA, Dnnis W. MLvy, CFA, Jrl E. Pinto, CFA, n Dvi E. Runkl, CFA Multipl Rrssion n Issus in Rrssion Anlysis Quntittiv Mtos or Invstmnt Anlysis, Son Eition, y Rir A. DFuso, CFA, Dnnis W. MLvy, CFA, Jrl E. Pinto, CFA, n Dvi E. Runkl, CFA Tim- Sris Anlysis Quntittiv Mtos or Invstmnt Anlysis, Son Eition, y Rir A. DFuso, CFA, Dnnis W. MLvy, CFA, Jrl E. Pinto, CFA, n Dvi E. Runkl, CFA LEARNING OUTCOMES READING 9. CORRELATION AND REGRESSION i j k lult n intrprt smpl ovrin n smpl orrltion oiint, n intrprt sttr plot; sri limittions to orrltion nlysis; ormult tst o t ypotsis tt t popultion orrltion oiint quls zro, n trmin wtr t ypotsis is rjt t ivn lvl o siniin; istinuis twn t pnnt n inpnnt vrils in linr rrssion; sri t ssumptions unrlyin linr rrssion, n intrprt rrssion oiints; lult n intrprt t stnr rror o stimt, t oiint o trmintion, n onin intrvl or rrssion oiint; ormult null n ltrntiv ypotsis out popultion vlu o rrssion oiint, n trmin t pproprit tst sttisti n wtr t null ypotsis is rjt t ivn lvl o siniin; lult t prit vlu or t pnnt vril, ivn n stimt rrssion mol n vlu or t inpnnt vril; lult n intrprt onin intrvl or t prit vlu o t pnnt vril; sri t us o nlysis o vrin (ANOVA) in rrssion nlysis, intrprt ANOVA rsults, n lult n intrprt t F-sttisti; sri limittions o rrssion nlysis Lvl II CFA Prorm Curriulum CFA Institut.

7 Stuy Sssion 3 3 READING 10. MULTIPLE REGRESSION AND ISSUES IN REGRESSION ANALYSIS i j k l ormult multipl rrssion qution to sri t rltion twn pnnt vril n svrl inpnnt vrils, n trmin t sttistil siniin o inpnnt vril; intrprt stimt rrssion oiints n tir p-vlus; ormult null n n ltrntiv ypotsis out t popultion vlu o rrssion oiint, lult t vlu o t tst sttisti, n trmin wtr to rjt t null ypotsis t ivn lvl o siniin; intrprt t rsults o ypotsis tsts o rrssion oiints; lult n intrprt 1) onin intrvl or t popultion vlu o rrssion oiint n 2) prit vlu or t pnnt vril, ivn n stimt rrssion mol n ssum vlus or t inpnnt vrils; xplin t ssumptions o multipl rrssion mol; lult n intrprt t F-sttisti, n sri ow it is us in rrssion nlysis; istinuis twn n intrprt t R 2 n just R 2 in multipl rrssion; vlut ow wll rrssion mol xplins t pnnt vril y nlyzin t output o t rrssion qution n n ANOVA tl; ormult multipl rrssion qution y usin ummy vrils to rprsnt qulittiv tors, n intrprt t oiints n rrssion rsults; xplin t typs o troskstiity n ow troskstiity n sril orrltion t sttistil inrn; sri multiollinrity, n xplin its uss n ts in rrssion nlysis; m sri ow mol misspiition ts t rsults o rrssion nlysis, n sri ow to voi ommon orms o misspiition; n o sri mols wit qulittiv pnnt vrils; vlut n intrprt multipl rrssion mol n its rsults. READING 11. TIME- SERIES ANALYSIS lult n vlut t prit trn vlu or tim sris, mol s itr linr trn or lo- linr trn, ivn t stimt trn oiints; sri tors tt trmin wtr linr or lo- linr trn soul us wit prtiulr tim sris, n vlut limittions o trn mols; xplin t rquirmnt or tim sris to ovrin sttionry, n sri t siniin o sris tt is not sttionry; sri t strutur o n utorrssiv (AR) mol o orr p, n lult on- n two- prio- orsts ivn t stimt oiints; xplin ow utoorrltions o t rsiuls n us to tst wtr t utorrssiv mol its t tim sris; xplin mn rvrsion, n lult mn- rvrtin lvl; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

8 Stuy Sssion 3 4 i j k l ontrst in- smpl n out- o- smpl orsts, n ompr t orstin ury o irnt tim- sris mols s on t root mn squr rror ritrion; xplin t instility o oiints o tim- sris mols; sri rtristis o rnom wlk prosss, n ontrst tm to ovrin sttionry prosss; sri implitions o unit roots or tim- sris nlysis, xplin wn unit roots r likly to our n ow to tst or tm, n monstrt ow tim sris wit unit root n trnsorm so it n nlyz wit n AR mol; sri t stps o t unit root tst or nonsttionrity, n xplin t rltion o t tst to utorrssiv tim- sris mols; xplin ow to tst n orrt or ssonlity in tim- sris mol, n lult n intrprt orst vlu usin n AR mol wit ssonl l; m xplin utorrssiv onitionl troskstiity (ARCH), n sri ow ARCH mols n ppli to prit t vrin o tim sris; n o xplin ow tim- sris vrils soul nlyz or nonsttionrity n/or ointrtion or us in linr rrssion; trmin n pproprit tim- sris mol to nlyz ivn invstmnt prolm, n justiy tt oi Lvl II CFA Prorm Curriulum CFA Institut.

9 STUDY SESSION 4 Eonomis or Vlution Tis stuy sssion uils on t prinipls o onomis rom Lvl I n links tm to t vlution pross. T rins xplin ow t onomi nvironmnt ts irm s prormn. T irst rin sris toris o xn rt trmintion n ow ts n us to orst xn rts. Tr r t lst two rsons wy ts topis r importnt to invstmnt nlysts. First, nlysts n to vlut t urrny risks y t ompnis ty nlyz. Most lr ompnis o usinss intrntionlly, so xn rt lututions my t tir proitility n vlu. Son, most portolios r irtly xpos to t risk o xn rt lututions. Tis rin lys ountion or unrstnin mnmnt o portolio s urrny risk. T son rin sris tors tin onomi rowt n ow onomi rowt ts invstmnt isions n stok mrkt pprition. T inl rin in t stuy sssion sris rultion, its purposs, n its potntil ts on ompny s oprtin nvironmnt. Unrstnin rultion is importnt or inustry n ompny nlysis. READING ASSIGNMENTS Rin 12 Rin 13 Rin 14 Currny Exn Rts: Dtrmintion n Forstin y Mil R. Rosnr n Willim A. Brkr, CFA Eonomi Growt n t Invstmnt Dision y Pul Kutsovi, CFA Eonomis o Rultion y Cstr S. Sptt 2015 Lvl II CFA Prorm Curriulum CFA Institut.

10 Stuy Sssion 4 2 LEARNING OUTCOMES READING 12. CURRENCY EXCHANGE RATES: DETERMINATION AND FORECASTING i j k l lult n intrprt t i sk spr on spot or orwr orin urrny quottion n sri t tors tt t t i or spr; intiy trinulr ritr opportunity n lult its proit, ivn t i or quottions or tr urrnis; istinuis twn spot n orwr rts n lult t orwr prmium/ isount or ivn urrny; lult t mrk- to- mrkt vlu o orwr ontrt; xplin intrntionl prity rltions (ovr n unovr intrst rt prity, pursin powr prity, n t intrntionl Fisr t); sri rltions mon t intrntionl prity onitions; vlut t us o t urrnt spot rt, t orwr rt, pursin powr prity, n unovr intrst prity to orst utur spot xn rts; xplin ppros to ssssin t lon- run ir vlu o n xn rt; sri t rry tr n its rltion to unovr intrst rt prity n lult t proit rom rry tr; xplin ow lows in t ln o pymnt ounts t urrny xn rts; sri t Munll Flmin mol, t montry ppro, n t sst mrkt (portolio ln) ppro to xn rt trmintion; orst t irtion o t xpt n in n xn rt s on ln o pymnt, Munll Flmin, montry, n sst mrkt ppros to xn rt trmintion; m xplin t potntil ts o montry n isl poliy on xn rts; n o p sri ojtivs o ntrl nk intrvntion n pitl ontrols n sri t tivnss o intrvntion n pitl ontrols; sri wrnin sins o urrny risis; sri uss o tnil nlysis in orstin xn rts. READING 13. ECONOMIC GROWTH AND THE INVESTMENT DECISION ompr tors vorin n limitin onomi rowt in vlop n vlopin onomis; sri t rltion twn t lon- run rt o stok mrkt pprition n t sustinl rowt rt o t onomy; xplin wy potntil GDP n its rowt rt mttr or quity n ix inom invstors; istinuis twn pitl pnin invstmnt n tnoloil prorss n xplin ow ts onomi rowt n lor proutivity; orst potntil GDP s on rowt ountin rltions; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

11 Stuy Sssion 4 3 i j k l xplin ow nturl rsours t onomi rowt n vlut t rumnt tt limit vilility o nturl rsours onstrins onomi rowt; xplin ow morpis, immirtion, n lor or prtiiption t t rt n sustinility o onomi rowt; xplin ow invstmnt in pysil pitl, umn pitl, n tnoloil vlopmnt ts onomi rowt; ompr lssil rowt tory, nolssil rowt tory, n nonous rowt tory; xplin n vlut onvrn ypotss; sri t onomi rtionl or ovrnmnts to provi inntivs to privt invstmnt in tnoloy n knowl; sri t xpt impt o rmovin tr rrirs on pitl invstmnt n proits, mploymnt n ws, n rowt in t onomis involv. READING 14. ECONOMICS OF REGULATION i sri lssiitions o rultions n rultors; sri uss o sl- rultion in innil mrkts; sri t onomi rtionl or rultory intrvntion; sri rultory intrpnnis n tir ts; sri tools o rultory intrvntion in mrkts; xplin purposs in rultin ommr n innil mrkts; sri ntiomptitiv viors trt y ntitrust lws lolly n vlut t ntitrust risk ssoit wit ivn usinss strty; sri nits n osts o rultion; vlut ow spii rultion ts n inustry, ompny, or surity Lvl II CFA Prorm Curriulum CFA Institut.

12 STUDY SESSION 5 Finnil Rportin n Anlysis Invntoris n Lon- liv Assts T rins in tis stuy sssion ous on t ts tt irnt ountin mtos n v on innil sttmnts n rtios. Comprin t prormn o ompnis is llnin u to t vrity o llowl ountin ois. Anlysts must intiy n unrstn ny ountin irns n mk pproprit justmnts to rport innil sttmnts to iv omprility. I invntory pri lvls n ovr tim, t oi o invntory vlution mto ts ompny s innil sttmnts n rtios. Anlysts must know t ts o irnt invntory vlution mtos n l to ompr innil sttmnts prpr usin t sm or irnt mtos. Anlysts lso must unrstn ow t ollowin t innil sttmnts n rtios: 1 pitlizin vrsus xpnsin osts, 2 t oi o prition mto, 3 sst impirmnt n rvlution, 4 lsin vrsus pursin n sst, n 5 rorin ls s inn ls vrsus n oprtin ls. READING ASSIGNMENTS Rin 15 Rin 16 Invntoris: Implitions or Finnil Sttmnts n Rtios y Mil A. Broin, CFA Lon- liv Assts: Implitions or Finnil Sttmnts n Rtios y Elin Hnry, CFA, n Elizt A. Goron Not: Nw rulins n/or pronounmnts issu tr t pulition o t rins in innil rportin n nlysis my us som o t inormtion in ts rins to om t. Cnits r xpt to milir wit t ovrll nlytil rmwork ontin in t stuy sssion rins, s wll s t implitions o ltrntiv ountin mtos or innil nlysis n vlution, s provi in t ssin rins. Cnits r not rsponsil or ns tt our tr t mtril ws writtn Lvl II CFA Prorm Curriulum CFA Institut.

13 Stuy Sssion 5 2 LEARNING OUTCOMES READING 15. INVENTORIES: IMPLICATIONS FOR FINANCIAL STATEMENTS AND RATIOS lult n xplin ow inltion n ltion o invntory osts t t innil sttmnts n rtios o ompnis tt us irnt invntory vlution mtos; xplin LIFO rsrv n LIFO liquition n tir ts on innil sttmnts n rtios; onvrt ompny s rport innil sttmnts rom LIFO to FIFO or purposs o omprison; sri t implitions o vluin invntory t nt rlisl vlu or innil sttmnts n rtios; nlyz n ompr t innil sttmnts n rtios o ompnis, inluin tos tt us irnt invntory vlution mtos; xplin issus tt nlysts soul onsir wn xminin ompny s invntory islosurs n otr sours o inormtion. READING 16. LONG- LIVED ASSETS: IMPLICATIONS FOR FINANCIAL STATEMENTS AND RATIOS xplin n vlut ow pitlisin vrsus xpnsin osts in t prio in wi ty r inurr ts innil sttmnts n rtios; xplin n vlut ow t irnt prition mtos or proprty, plnt, n quipmnt t innil sttmnts n rtios; xplin n vlut ow impirmnt n rvlution o proprty, plnt, n quipmnt, n intnil ssts t innil sttmnts n rtios; nlyz n intrprt innil sttmnt islosurs rrin lon- liv ssts; xplin n vlut ow lsin rtr tn pursin ssts ts innil sttmnts n rtios; xplin n vlut ow inn lss n oprtin lss t innil sttmnts n rtios rom t prsptivs o ot t lssor n t lss Lvl II CFA Prorm Curriulum CFA Institut.

14 STUDY SESSION 6 Finnil Rportin n Anlysis Introrport Invstmnts, Post- Employmnt n Sr- Bs Compnstion, n Multintionl Oprtions Introrport invstmnts riv irnt ountin trtmnts pnin on t prnt ownrsip, mount o ontrol, n otr vrils tt in t rltion twn t ompny mkin t invstmnt (t invstor) n t invst. An nlysis o introrport invstmnts is nssry to sprt oprtin prormn rom invstin prormn n to unrstn t potntil ountin istortions tt ris s rsult o ountin stnrs n/or rnins mnmnt. Mrrs n quisitions n n importnt strti onsirtion tt ts innil sttmnts n rtios. T ountin stnrs tt ovrn usinss omintions r t rsult o joint projt twn t IASB n t FASB. IFRS n US GAAP rquir t us o t quisition mto. T strutur n sop o usinss omintions rt omprility llns us t innil sttmnts o t quirin ompny my rilly n. An nlyst must unrstn ow usinss omintions, inluin ull onsolition n proportiont onsolition, t t omprility o innil sttmnts n rtios. IFRS n US GAAP rquir t rportin o nt olitions (or nt ssts) or pnsions n otr post- mploymnt nits on t ln st. IFRS n US GAAP my ir in tir trtmnt o prioi pnsion osts n rportin o pnsion xpnss. Anlysts must lso unrstn ow t ountin trtmnt o mploy stok options ts innil sttmnts. Multintionl ompnis otn v susiiris in irnt ountris tt mintin tir ooks n rors in urrnis irnt rom tt o t prnt ompny. Flotin xn rts prsnt n itionl lln. Forin urrny trnstions n trnsltions in prnt ompny s innil sttmnts must nlyz to vlut ompny s prormn n innil position. Not: Nw rulins n/or pronounmnts issu tr t pulition o t rins in innil rportin n nlysis my us som o t inormtion in ts rins to om t. Cnits r xpt to milir wit t ovrll nlytil rmwork ontin in t stuy sssion rins, s wll s t implitions o ltrntiv ountin mtos or innil nlysis n vlution, s provi in t ssin rins. Cnits r not rsponsil or ns tt our tr t mtril ws writtn Lvl II CFA Prorm Curriulum CFA Institut.

15 Stuy Sssion 6 2 READING ASSIGNMENTS Rin 17 Rin 18 Rin 19 Introrport Invstmnts y Susn Prry Willims Employ Compnstion: Post- Employmnt n Sr- Bs y Elin Hnry, CFA, n Elizt A. Goron Multintionl Oprtions y Timoty S. Doupnik, PD, n Elin Hnry, CFA LEARNING OUTCOMES READING 17. INTERCORPORATE INVESTMENTS sri t lssiition, msurmnt, n islosur unr Intrntionl Finnil Rportin Stnrs (IFRS) or 1) invstmnts in innil ssts, 2) invstmnts in ssoits, 3) joint vnturs, 4) usinss omintions, n 5) spil purpos n vril intrst ntitis; istinuis twn IFRS n US GAAP in t lssiition, msurmnt, n islosur o invstmnts in innil ssts, invstmnts in ssoits, joint vnturs, usinss omintions, n spil purpos n vril intrst ntitis; nlyz ow irnt mtos us to ount or introrport invstmnts t innil sttmnts n rtios. READING 18. EMPLOYEE COMPENSATION: POST- EMPLOYMENT AND SHARE-BASED sri t typs o post- mploymnt nit plns n implitions or innil rports; xplin n lult msurs o in nit pnsion olition (i.., prsnt vlu o t in nit olition n projt nit olition) n nt pnsion liility (or sst); sri t omponnts o ompny s in nit pnsion osts; xplin n lult t t o in nit pln s ssumptions on t in nit olition n prioi pnsion ost; xplin n lult ow justin or itms o pnsion n otr postmploymnt nits tt r rport in t nots to t innil sttmnts ts innil sttmnts n rtios; intrprt pnsion pln not islosurs inluin s low rlt inormtion; xplin issus ssoit wit ountin or sr- s ompnstion; xplin ow ountin or stok rnts n stok options ts innil sttmnts, n t importn o ompnis ssumptions in vluin ts rnts n options Lvl II CFA Prorm Curriulum CFA Institut.

16 Stuy Sssion 6 3 READING 19. MULTINATIONAL OPERATIONS i j istinuis mon prsnttion (rportin) urrny, untionl urrny, n lol urrny; sri orin urrny trnstion xposur, inluin ountin or n islosurs out orin urrny trnstion ins n losss; nlyz ow ns in xn rts t t trnslt sls o t susiiry n prnt ompny; ompr t urrnt rt mto n t tmporl mto, vlut ow ts t prnt ompny s ln st n inom sttmnt, n trmin wi mto is pproprit in vrious snrios; lult t trnsltion ts n vlut t trnsltion o susiiry s ln st n inom sttmnt into t prnt ompny s prsnttion urrny; nlyz ow t urrnt rt mto n t tmporl mto t innil sttmnts n rtios; nlyz ow ltrntiv trnsltion mtos or susiiris oprtin in yprinltionry onomis t innil sttmnts n rtios; sri ow multintionl oprtions t ompny s tiv tx rt; xplin ow ns in t omponnts o sls t rnins sustinility; nlyz ow urrny lututions potntilly t innil rsults, ivn ompny s ountris o oprtion Lvl II CFA Prorm Curriulum CFA Institut.

17 STUDY SESSION 7 Finnil Rportin n Anlysis Qulity o Finnil Rports n Finnil Sttmnt Anlysis Tis stuy sssion ouss on vlutin t qulity o innil rports n pplyin innil sttmnt nlysis tniqus. T irst rin sows t pplition o onptul rmwork to ssssin t qulity o ompny s innil rports. T ssssmnt inlus intiyin n vlutin potntil prolms. T son rin uss mini- ss to monstrt t pplition o rmwork or nlyzin innil sttmnts. READING ASSIGNMENTS Rin 20 Rin 21 LEARNING OUTCOMES Evlutin Qulity o Finnil Rports y Jk T. Cisilski, Jr., CFA, Elin Hnry, CFA, n Toms I. Sllin Intrtion o Finnil Sttmnt Anlysis Tniqus y Jk T. Cisilski, Jr., CFA READING 20. EVALUATING QUALITY OF FINANCIAL REPORTS monstrt t us o onptul rmwork or ssssin t qulity o ompny s innil rports; xplin potntil prolms tt t t qulity o innil rports; sri ow to vlut t qulity o ompny s innil rports; vlut t qulity o ompny s innil rports; sri t onpt o sustinl (prsistnt) rnins; Not: Nw rulins n/or pronounmnts issu tr t pulition o t rins in innil rportin n nlysis my us som o t inormtion in ts rins to om t. Cnits r xpt to milir wit t ovrll nlytil rmwork ontin in t stuy sssion rins, s wll s t implitions o ltrntiv ountin mtos or innil nlysis n vlution, s provi in t ssin rins. Cnits r not rsponsil or ns tt our tr t mtril ws writtn Lvl II CFA Prorm Curriulum CFA Institut.

18 Stuy Sssion 7 2 i j k l sri initors o rnins qulity; xplin mn rvrsion in rnins n ow t ruls omponnt o rnins ts t sp o mn rvrsion; vlut t rnins qulity o ompny; sri initors o s low qulity; vlut t s low qulity o ompny; sri initors o ln st qulity; vlut t ln st qulity o ompny; m sri sours o inormtion out risk. READING 21. INTEGRATION OF FINANCIAL STATEMENT ANALYSIS TECHNIQUES monstrt t us o rmwork or t nlysis o innil sttmnts, ivn prtiulr prolm, qustion, or purpos (.., vluin quity s on omprls, ritiquin rit rtin, otinin omprnsiv pitur o innil lvr, vlutin t prsptivs ivn in mnmnt s isussion o innil rsults); intiy innil rportin ois n iss tt t t qulity n omprility o ompnis innil sttmnts, n xplin ow su iss my t innil isions; vlut t qulity o ompny s innil t, n rommn pproprit justmnts to improv qulity n omprility wit similr ompnis, inluin justmnts or irns in ountin stnrs, mtos, n ssumptions; vlut ow ivn n in ountin stnrs, mtos, or ssumptions ts innil sttmnts n rtios; nlyz n intrprt ow ln st moiitions, rnins normliztion, n s low sttmnt rlt moiitions t ompny s innil sttmnts, innil rtios, n ovrll innil onition Lvl II CFA Prorm Curriulum CFA Institut.

19 STUDY SESSION 8 Corport Finn Tis stuy sssion irst prsnts pitl utin nlysis, ousin on t pplition o onpts in t orport inn ision- mkin pross. Ts pitl utin prinipls r ritil or n nlyst insi ompny prprin pitl utin rommntions s wll s or n xtrnl nlyst stimtin t vlu o t ompny. T rminr o t stuy sssion ovrs pitl strutur n ivin poliy. T prsnttion o pitl strutur strts wit t lssi Moilini Millr irrlvn proposition. Tis proposition stts tt ompny s vlu is not t y pitl strutur ois. T rin tn onsirs ow t optiml pitl strutur is t y txs, ny osts, n t possiility o innil istrss. T rin on ivin poliy isusss t ompny s oi twn rinvstin or istriutin rnins, n t oi twn pyin s ivins n rpursin srs. Anlysts r intrst in pitl strutur n ivin poliis us o tir t on t risk n rturn rtristis o orport quitis n ons. READING ASSIGNMENTS Rin 22 Rin 23 Rin 24 Cpitl Butin Corport Finn: A Prtil Appro, y Mill R. Clymn, CFA, Mrtin S. Frison, CFA, n Gor H. Trouton, CFA Cpitl Strutur y Rj Arwl, CFA, Pml Ptrson Drk, CFA, Am Koor, CFA, n Grory Noron, CFA Divins n Sr Rpurss: Anlysis y Grory Noron, CFA, n Gor H. Trouton, CFA 2015 Lvl II CFA Prorm Curriulum CFA Institut.

20 Stuy Sssion 8 2 LEARNING OUTCOMES READING 22. CAPITAL BUDGETING i lult t yrly s lows o xpnsion n rplmnt pitl projts, n vlut ow t oi o prition mto ts tos s lows; xplin ow inltion ts pitl utin nlysis; vlut pitl projts n trmin t optiml pitl projt in situtions o 1) mutully xlusiv projts wit unqul livs, usin itr t lst ommon multipl o livs ppro or t quivlnt nnul nnuity ppro, n 2) pitl rtionin; xplin ow snsitivity nlysis, snrio nlysis, n Mont Crlo simultion n us to ssss t stn- lon risk o pitl projt; xplin n lult t isount rt, s on mrkt risk mtos, to us in vluin pitl projt; sri typs o rl options n vlut pitl projt usin rl options; sri ommon pitl utin pitlls; lult n intrprt ountin inom n onomi inom in t ontxt o pitl utin; istinuis mon t onomi proit, rsiul inom, n lims vlution mols or pitl utin n vlut pitl projt usin. READING 23. CAPITAL STRUCTURE xplin t Moilini Millr propositions rrin pitl strutur, inluin t ts o lvr, txs, innil istrss, ny osts, n symmtri inormtion on ompny s ost o quity, ost o pitl, n optiml pitl strutur; sri trt pitl strutur n xplin wy ompny s tul pitl strutur my lutut roun its trt; sri t rol o t rtins in pitl strutur poliy; xplin tors n nlyst soul onsir in vlutin t t o pitl strutur poliy on vlution; sri intrntionl irns in t us o innil lvr, tors tt xplin ts irns, n implitions o ts irns or invstmnt nlysis. READING 24. DIVIDENDS AND SHARE REPURCHASES: ANALYSIS ompr toris o ivin poliy, n xplin implitions o or sr vlu ivn sription o orport ivin tion; sri typs o inormtion (sinls) tt ivin inititions, inrss, rss, n omissions my onvy; xplin ow lintl ts n ny issus my t ompny s pyout poliy; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

21 Stuy Sssion 8 3 xplin tors tt t ivin poliy; lult n intrprt t tiv tx rt on ivn urrny unit o orport rnins unr oul txtion, ivin imputtion, n split- rt tx systms; ompr stl ivin, onstnt ivin pyout rtio, n rsiul ivin pyout poliis, n lult t ivin unr poliy; xplin t oi twn pyin s ivins n rpursin srs; sri ro trns in orport ivin poliis; i lult n intrprt ivin ovr rtios s on 1) nt inom n 2) r s low; j intiy rtristis o ompnis tt my not l to sustin tir s ivin Lvl II CFA Prorm Curriulum CFA Institut.

22 STUDY SESSION 9 Corport Finn Finnin n Control Issus Tis stuy sssion prsnts two mjor orniztionl topis o orport inn. First, orport ovrnn ovrs t systm o prinipls n poliis us to mn onlits o intrst mon vrious roups o stkolrs o orportion. Son, mrrs n quisitions n orport rstruturins, wi ristriut ownrsip n ontrol, r nlyz. READING ASSIGNMENTS Rin 25 Rin 26 Rin 27 Corport Prormn, Govrnn, n Businss Etis, Cptr 11 Strti Mnmnt: An Intrt Appro, Nint Eition, y Crls W.L. Hill n Grt R. Jons Corport Govrnn Corport Finn: A Prtil Appro, y Mill R. Clymn, CFA, Mrtin S. Frison, CFA, n Gor H. Trouton, CFA Mrrs n Aquisitions Corport Finn: A Prtil Appro, y Mill R. Clymn, CFA, Mrtin S. Frison, CFA, n Gor H. Trouton, CFA 2015 Lvl II CFA Prorm Curriulum CFA Institut.

23 Stuy Sssion 9 2 LEARNING OUTCOMES READING 25. CORPORATE PERFORMANCE, GOVERNANCE, AND BUSINESS ETHICS ompr intrsts o ky stkolr roups n xplin t purpos o stkolr impt nlysis; isuss prolms tt n ris in prinipl nt rltionsips n mnisms tt my mitit su prolms; isuss roots o until vior n ow mnrs mit nsur tt til issus r onsir in usinss ision mkin; ompr t Frimn otrin, Utilitrinism, Kntin Etis, n Rits n Justi Toris s ppros to til ision mkin. READING 26. CORPORATE GOVERNANCE sri ojtivs n or ttriuts o n tiv orport ovrnn systm, n vlut wtr ompny s orport ovrnn s tos ttriuts; ompr mjor usinss orms, n sri t onlits o intrst ssoit wit ; xplin onlits tt ris in ny rltionsips, inluin mnr srolr onlits n irtor srolr onlits; sri rsponsiilitis o t or o irtors, n xplin quliitions n or omptnis tt n invstmnt nlyst soul look or in t or o irtors; xplin tiv orport ovrnn prti s it rlts to t or o irtors, n vlut strnts n wknsss o ompny s orport ovrnn prti; sri lmnts o ompny s sttmnt o orport ovrnn poliis tt invstmnt nlysts soul ssss; sri nvironmntl, soil, n ovrnn risk xposurs; xplin t vlution implitions o orport ovrnn. READING 27. MERGERS AND ACQUISITIONS lssiy mrr n quisition (M&A) tivitis s on orms o intrtion n rltnss o usinss tivitis; xplin ommon motivtions in M&A tivity; xplin ootstrppin o rnins pr sr (EPS) n lult ompny s postmrr EPS; xplin, s on inustry li yls, t rltion twn mrr motivtions n typs o mrrs; ontrst mrr trnstion rtristis y orm o quisition, mto o pymnt, n ttitu o trt mnmnt; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

24 Stuy Sssion 9 3 i j k l istinuis mon pr- or n post- or tkovr ns mnisms; lult n intrprt t Hrinl Hirsmn Inx, n vlut t liklioo o n ntitrust lln or ivn usinss omintion; ompr t isount s low, omprl ompny, n omprl trnstion nlyss or vluin trt ompny, inluin t vnts n isvnts o ; lult r s lows or trt ompny, n stimt t ompny s intrinsi vlu s on isount s low nlysis; stimt t vlu o trt ompny usin omprl ompny n omprl trnstion nlyss; vlut tkovr i, n lult t stimt post- quisition vlu o n quirr n t ins ru to t trt srolrs vrsus t quirr srolrs; xplin ow pri n pymnt mto t t istriution o risks n nits in M&A trnstions; m sri rtristis o M&A trnstions tt rt vlu; n o istinuis mon quity rv- outs, spin- os, split- os, n liquition; xplin ommon rsons or rstruturin Lvl II CFA Prorm Curriulum CFA Institut.

25 STUDY SESSION 10 Equity Vlution Vlution Conpts Tis stuy sssion lys ountion or t stuy o quity vlution. T irst rin provis n ovrviw o mjor tms n importnt mols in quity vlution. T sssion ns wit prsnttion o topis rltin to rturns n isount rts, wi r ssntil to quity vlution. READING ASSIGNMENTS Rin 28 Rin 29 Equity Vlution: Applitions n Prosss Equity Asst Vlution, Son Eition, y Jrl E. Pinto, CFA, Elin Hnry, CFA, Toms R. Roinson, CFA, n Jon D. Stow, CFA Rturn Conpts Equity Asst Vlution, Son Eition, y Jrl E. Pinto, CFA, Elin Hnry, CFA, Toms R. Roinson, CFA, n Jon D. Stow, CFA LEARNING OUTCOMES READING 28. EQUITY VALUATION: APPLICATIONS AND PROCESSES in vlution n intrinsi vlu, n xplin sours o priv mispriin; xplin t oin onrn ssumption, n ontrst oin onrn vlu to liquition vlu; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

26 Stuy Sssion 10 2 sri initions o vlu, n justiy wi inition o vlu is most rlvnt to puli ompny vlution; sri pplitions o quity vlution; sri qustions tt soul rss in onutin n inustry n omptitiv nlysis; ontrst solut n rltiv vlution mols, n sri xmpls o typ o mol; sri sum- o- t- prts vlution n onlomrt isounts; xplin ro ritri or oosin n pproprit ppro or vluin ivn ompny. READING 29. RETURN CONCEPTS istinuis mon rliz olin prio rturn, xpt olin prio rturn, rquir rturn, rturn rom onvrn o pri to intrinsi vlu, isount rt, n intrnl rt o rturn; lult n intrprt n quity risk prmium usin istoril n orwrlookin stimtion ppros; stimt t rquir rturn on n quity invstmnt usin t pitl sst priin mol, t Fm Frn mol, t Pstor Stmu mol, mroonomi multitor mols, n t uil- up mto (.., on yil plus risk prmium); xplin t stimtion or puli ompnis, tinly tr puli ompnis, n nonpuli ompnis; sri strnts n wknsss o mtos us to stimt t rquir rturn on n quity invstmnt; xplin intrntionl onsirtions in rquir rturn stimtion; xplin n lult t wit vr ost o pitl or ompny; vlut t ppropritnss o usin prtiulr rt o rturn s isount rt, ivn sription o t s low to isount n otr rlvnt ts Lvl II CFA Prorm Curriulum CFA Institut.

27 STUDY SESSION 11 Equity Vlution Inustry n Compny Anlysis in Glol Contxt Tis stuy sssion provis insits on issus tt t surity vlution intrntionlly. Anlyzin inustris in lol ontxt n vlutin omptitiv ors tt will t rturns provi ountion or surity vlution isions. Disount ivin mols r xmin in til. READING ASSIGNMENTS Rin 30 Rin 31 Rin 32 Rin 33 T Fiv Comptitiv Fors Tt Sp Strty Hrvr Businss Rviw Your Strty Ns Strty Hrvr Businss Rviw Inustry n Compny Anlysis y Mttw L. Coin, CFA, Antony M. Fior, CFA, n Antonius J. vn Ooijn, CFA Disount Divin Vlution Equity Asst Vlution, Son Eition, y Jrl E. Pinto, CFA, Elin Hnry, CFA, Toms R. Roinson, CFA, n Jon D. Stow, CFA LEARNING OUTCOMES READING 30. THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY istinuis mon t iv omptitiv ors n xplin ow ty riv inustry proitility in t mium n lon run; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

28 Stuy Sssion 11 2 sri wy inustry rowt rt, tnoloy n innovtion, ovrnmnt, n omplmntry prouts n srvis r ltin tors rtr tn ors spin inustry strutur; intiy ns in inustry strutur, n orst tir ts on t inustry s proit potntil; xplin ow positionin ompny, xploitin inustry n, n spin inustry strutur my us to iv omptitiv vnt. READING 31. YOUR STRATEGY NEEDS A STRATEGY sri pritility n mllility s tors in ssssin n inustry; sri ow n inustry s pritility n mllility r xpt to t t oi o n pproprit orport strty (lssil, ptiv, visionry, or spin); vlut t pritility n mllility o n inustry n slt n pproprit strty. READING 32. INDUSTRY AND COMPANY ANALYSIS i j k l ompr top- own, ottom- up, n yri ppros or vlopin inputs to quity vlution mols; ompr rowt rltiv to GDP rowt n mrkt rowt n mrkt sr ppros to orstin rvnu; vlut wtr onomis o sl r prsnt in n inustry y nlyzin oprtin mrins n sls lvls; orst t ollowin osts: ost o oos sol, sllin nrl n ministrtiv osts, innin osts, n inom txs; sri ppros to ln st molin; sri t rltionsip twn rturn on invst pitl n omptitiv vnt; xplin ow omptitiv tors t pris n osts; ju t omptitiv position o ompny s on Portr s iv ors nlysis; xplin ow to orst inustry n ompny sls n osts wn ty r sujt to pri inltion or ltion; vlut t ts o tnoloil vlopmnts on mn, sllin pris, osts, n mrins; xplin onsirtions in t oi o n xpliit orst orizon; xplin n nlyst s ois in vlopin projtions yon t sort- trm orst orizon; m monstrt t vlopmnt o sls- s pro orm ompny mol Lvl II CFA Prorm Curriulum CFA Institut.

29 Stuy Sssion 11 3 READING 33. DISCOUNTED DIVIDEND VALUATION i j k l ompr ivins, r s low, n rsiul inom s inputs to isount s low mols, n intiy invstmnt situtions or wi msur is suitl; lult n intrprt t vlu o ommon stok usin t ivin isount mol (DDM) or sinl n multipl olin prios; lult t vlu o ommon stok usin t Goron rowt mol, n xplin t mol s unrlyin ssumptions; lult n intrprt t impli rowt rt o ivins usin t Goron rowt mol n urrnt stok pri; lult n intrprt t prsnt vlu o rowt opportunitis (PVGO) n t omponnt o t lin pri- to- rnins rtio (P/E) rlt to PVGO; lult n intrprt t justii lin n trilin P/Es usin t Goron rowt mol; lult t vlu o nonlll ix- rt prptul prrr stok; sri strnts n limittions o t Goron rowt mol, n justiy its sltion to vlu ompny s ommon srs; xplin t ssumptions n justiy t sltion o t two- st DDM, t H- mol, t tr- st DDM, or sprst molin to vlu ompny s ommon srs; xplin t rowt ps, trnsitionl ps, n mturity ps o usinss; sri trminl vlu, n xplin ltrntiv ppros to trminin t trminl vlu in DDM; lult n intrprt t vlu o ommon srs usin t two- st DDM, t H- mol, n t tr- st DDM; m stimt rquir rturn s on ny DDM, inluin t Goron rowt mol n t H- mol; n o p xplin t us o sprst molin to orst ivins n to vlu ommon srs; lult n intrprt t sustinl rowt rt o ompny, n monstrt t us o DuPont nlysis to stimt ompny s sustinl rowt rt; vlut wtr stok is ovrvlu, irly vlu, or unrvlu y t mrkt s on DDM stimt o vlu Lvl II CFA Prorm Curriulum CFA Institut.

30 STUDY SESSION 12 Equity Invstmnts Vlution Mols Tis stuy sssion prsnts itionl vlution mtos or stimtin ompny s intrinsi vlu. T ivin isount mol isuss in Stuy Sssion 11 rmins slin mol. T r s low ppro to vlution is n importnt ltrntiv to t ivin isount mol wn ivins r not t st rprsnttion o ompny s vlu. Pri n ntrpris multipls r mon t most milir n wily us vlution msurs us o t rltiv s wit wi ty n us n ommunit. Rsiul inom mols rprsnt n ppro to vlution in wi ountin inom is just to rlt ution or t opportunity ost o pitl. T inl rin is n introution to ow ompnis witout rily mrktl srs r vlu. READING ASSIGNMENTS Rin 34 Rin 35 Rin 36 Rin 37 Fr Cs Flow Vlution Equity Asst Vlution, Son Eition, y Jrl E. Pinto, CFA, Elin Hnry, CFA, Toms R. Roinson, CFA, n Jon D. Stow, CFA Mrkt- Bs Vlution: Pri n Entrpris Vlu Multipls Equity Asst Vlution, Son Eition, y Jrl E. Pinto, CFA, Elin Hnry, CFA, Toms R. Roinson, CFA, n Jon D. Stow, CFA Rsiul Inom Vlution Equity Asst Vlution, Son Eition, y Jrl E. Pinto, CFA, Elin Hnry, CFA, Toms R. Roinson, CFA, n Jon D. Stow, CFA Privt Compny Vlution y Rymon D. Rt, ASA, CFA 2015 Lvl II CFA Prorm Curriulum CFA Institut.

31 Stuy Sssion 12 2 LEARNING OUTCOMES READING 34. FREE CASH FLOW VALUATION i j k l ompr t r s low to t irm (FCFF) n r s low to quity (FCFE) ppros to vlution; xplin t ownrsip prsptiv impliit in t FCFE ppro; xplin t pproprit justmnts to nt inom, rnins or intrst n txs (EBIT), rnins or intrst, txs, prition, n mortiztion (EBITDA), n s low rom oprtions (CFO) to lult FCFF n FCFE; lult FCFF n FCFE; sri ppros or orstin FCFF n FCFE; ompr t FCFE mol n ivin isount mols; xplin ow ivins, sr rpurss, sr issus, n ns in lvr my t utur FCFF n FCFE; vlut t us o nt inom n EBITDA s proxis or s low in vlution; xplin t sinl- st (stl- rowt), two- st, n tr- st FCFF n FCFE mols, n slt n justiy t pproprit mol ivn ompny s rtristis; stimt ompny s vlu usin t pproprit r s low mol(s); xplin t us o snsitivity nlysis in FCFF n FCFE vlutions; sri ppros or lultin t trminl vlu in multist vlution mol; m vlut wtr stok is ovrvlu, irly vlu, or unrvlu s on r s low vlution mol. READING 35. MARKET- BASED VALUATION: PRICE AND ENTERPRISE VALUE MULTIPLES istinuis twn t mto o omprls n t mto s on orst unmntls s ppros to usin pri multipls in vlution, n xplin onomi rtionls or ppro; lult n intrprt justii pri multipl; sri rtionls or n possil rwks to usin ltrntiv pri multipls n ivin yil in vlution; lult n intrprt ltrntiv pri multipls n ivin yil; lult n intrprt unrlyin rnins, xplin mtos o normlizin rnins pr sr (EPS), n lult normliz EPS; xplin n justiy t us o rnins yil (E/P); sri unmntl tors tt inlun ltrntiv pri multipls n ivin yil; lult n intrprt t justii pri- to- rnins rtio (P/E), pri- toook rtio (P/B), n pri- to- sls rtio (P/S) or stok, s on orst unmntls; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

32 Stuy Sssion 12 3 i j k l lult n intrprt prit P/E, ivn ross- stionl rrssion on unmntls, n xplin limittions to t ross- stionl rrssion mtooloy; vlut stok y t mto o omprls, n xplin t importn o unmntls in usin t mto o omprls; lult n intrprt t P/E- to- rowt rtio (PEG), n xplin its us in rltiv vlution; lult n xplin t us o pri multipls in trminin trminl vlu in multist isount s low (DCF) mol; m xplin ltrntiv initions o s low us in pri n ntrpris vlu (EV) multipls, n sri limittions o inition; n o p q r lult n intrprt EV multipls, n vlut t us o EV/EBITDA; xplin sours o irns in ross- orr vlution omprisons; sri momntum initors n tir us in vlution; xplin t us o t ritmti mn, t rmoni mn, t wit rmoni mn, n t min to sri t ntrl tnny o roup o multipls; vlut wtr stok is ovrvlu, irly vlu, or unrvlu s on omprisons o multipls. READING 36. RESIDUAL INCOME VALUATION i j k l lult n intrprt rsiul inom, onomi vlu, n mrkt vlu ; sri t uss o rsiul inom mols; lult t intrinsi vlu o ommon stok usin t rsiul inom mol, n ompr vlu ronition in rsiul inom n otr prsnt vlu mols; xplin unmntl trminnts o rsiul inom; xplin t rltion twn rsiul inom vlution n t justii prito- ook rtio s on orst unmntls; lult n intrprt t intrinsi vlu o ommon stok usin sinl- st (onstnt- rowt) n multist rsiul inom mols; lult t impli rowt rt in rsiul inom, ivn t mrkt pri- toook rtio n n stimt o t rquir rt o rturn on quity; xplin ontinuin rsiul inom, n justiy n stimt o ontinuin rsiul inom t t orst orizon, ivn ompny n inustry prospts; ompr rsiul inom mols to ivin isount n r s low mols; xplin strnts n wknsss o rsiul inom mols, n justiy t sltion o rsiul inom mol to vlu ompny s ommon stok; sri ountin issus in pplyin rsiul inom mols; vlut wtr stok is ovrvlu, irly vlu, or unrvlu s on rsiul inom mol Lvl II CFA Prorm Curriulum CFA Institut.

33 Stuy Sssion 12 4 READING 37. PRIVATE COMPANY VALUATION i j k l ompr puli n privt ompny vlution; sri uss o privt usinss vlution, n xplin pplitions o rtst onrn to innil nlysts; xplin vrious initions o vlu, n monstrt ow irnt initions n l to irnt stimts o vlu; xplin t inom, mrkt, n sst- s ppros to privt ompny vlution n tors rlvnt to t sltion o ppro; xplin s low stimtion issus rlt to privt ompnis n justmnts rquir to stimt normliz rnins; lult t vlu o privt ompny usin r s low, pitliz s low, n/or xss rnins mtos; xplin tors tt rquir justmnt wn stimtin t isount rt or privt ompnis; ompr mols us to stimt t rquir rt o rturn to privt ompny quity (or xmpl, t CAPM, t xpn CAPM, n t uil- up ppro); lult t vlu o privt ompny s on mrkt ppro mtos, n sri vnts n isvnts o mto; sri t sst- s ppro to privt ompny vlution; xplin n vlut t ts on privt ompny vlutions o isounts n prmiums s on ontrol n mrktility; sri t rol o vlution stnrs in vluin privt ompnis Lvl II CFA Prorm Curriulum CFA Institut.

34 STUDY SESSION 13 Altrntiv Invstmnts Tis stuy sssion isusss t ollowin toris o ltrntiv invstmnts: rl stt, privt quity, n ommoitis. Rl stt invstmnts, ot privt invstmnt n invstmnt trou pulily tr suritis, r sri n mtos or nlysis n vlution r prsnt. Privt quity, inluin vntur pitl n lvr uyouts, is xmin rom t prsptivs o privt quity irm vlutin quity invstmnts or its portolio n n invstor vlutin prtiiption in privt quity un. T stuy sssion onlus wit n ovrviw o invstin in ommoitis. READING ASSIGNMENTS Rin 38 Rin 39 Rin 40 Rin 41 Privt Rl Estt Invstmnts y Jry D. Fisr n Bryn D. MGror Pulily Tr Rl Estt Suritis y Antony Polon, CFA, In Ross O Rilly, CFA, n Dvi Krut, CFA Privt Equity Vlution y Yvs Courtois, CFA, n Tim Jnkinson A Primr on Commoity Invstin T Hnook o Commoity Invstin y Frnk J. Fozzi, CFA, Roln Füss, n Ditr G. Kisr, Eitors 2015 Lvl II CFA Prorm Curriulum CFA Institut.

35 Stuy Sssion 13 2 LEARNING OUTCOMES READING 38. PRIVATE REAL ESTATE INVESTMENTS i j k l lssiy n sri si orms o rl stt invstmnts; sri t rtristis, t lssiition, n si smnts o rl stt; xplin t rol in portolio, onomi vlu trminnts, invstmnt rtristis, n prinipl risks o privt rl stt; sri ommril proprty typs, inluin tir istintiv invstmnt rtristis; ompr t inom, ost, n sls omprison ppros to vluin rl stt proprtis; stimt n intrprt t inputs (or xmpl, nt oprtin inom, pitliztion rt, n isount rt) to t irt pitliztion n isount s low vlution mtos; lult t vlu o proprty usin t irt pitliztion n isount s low vlution mtos; ompr t irt pitliztion n isount s low vlution mtos; lult t vlu o proprty usin t ost n sls omprison ppros; sri u ilin in privt quity rl stt invstmnt; isuss privt quity rl stt invstmnt inis, inluin tir onstrution n potntil iss; xplin t rol in portolio, t mjor onomi vlu trminnts, invstmnt rtristis, prinipl risks, n u ilin o privt rl stt t invstmnt; m lult n intrprt innil rtios us to nlyz n vlut privt rl stt invstmnts. READING 39. PUBLICLY TRADED REAL ESTATE SECURITIES sri typs o pulily tr rl stt suritis; xplin vnts n isvnts o invstin in rl stt trou pulily tr suritis; xplin onomi vlu trminnts, invstmnt rtristis, prinipl risks, n u ilin onsirtions or rl stt invstmnt trust (REIT) srs; sri typs o REITs; justiy t us o nt sst vlu pr sr (NAVPS) in REIT vlution n stimt NAVPS s on orst s nt oprtin inom; sri t us o uns rom oprtions (FFO) n just uns rom oprtions (AFFO) in REIT vlution; ompr t nt sst vlu, rltiv vlu (pri- to- FFO n pri- to- AFFO), n isount s low ppros to REIT vlution; lult t vlu o REIT sr usin nt sst vlu, pri- to- FFO n pri- to- AFFO, n isount s low ppros Lvl II CFA Prorm Curriulum CFA Institut.

36 Stuy Sssion 13 3 READING 40. PRIVATE EQUITY VALUATION i xplin sours o vlu rtion in privt quity; xplin ow privt quity irms lin tir intrsts wit tos o t mnrs o portolio ompnis; istinuis twn t rtristis o uyout n vntur pitl invstmnts; sri vlution issus in uyout n vntur pitl trnstions; xplin ltrntiv xit routs in privt quity n tir impt on vlu; xplin privt quity un struturs, trms, vlution, n u ilin in t ontxt o n nlysis o privt quity un rturns; xplin risks n osts o invstin in privt quity; intrprt n ompr innil prormn o privt quity uns rom t prsptiv o n invstor; lult mnmnt s, rri intrst, nt sst vlu, istriut to pi in (DPI), rsiul vlu to pi in (RVPI), n totl vlu to pi in (TVPI) o privt quity un; A Not on Vlution o Vntur Cpitl Dls: (Appnix 40) j k lult pr- mony vlution, post- mony vlution, ownrsip rtion, n pri pr sr pplyin t vntur pitl mto 1) wit sinl n multipl innin rouns n 2) in trms o IRR; monstrt ltrntiv mtos to ount or risk in vntur pitl. READING 41. A PRIMER ON COMMODITY INVESTING i sri typs o mrkt prtiipnts in ommoity uturs mrkts; xplin storility n rnwility in t ontxt o ommoitis n trmin wtr ommoity is storl n/or rnwl; xplin t onvnin yil n ow it rlts to t stok (invntory lvl) o ommoity; istinuis mon pitl ssts, stor- o- vlu ssts, n onsuml or trnsrl ssts n xplin implitions or vlution; ompr wys o prtiiptin in ommoity mrkts, inluin vnts n isvnts o ; xplin kwrtion n ontno in trms o spot n uturs pris; sri t omponnts o rturn to ommoity uturs n portolio o ommoity uturs; xplin ow t sin o t roll rturn pns on t trm strutur o uturs pris; ompr t insurn prsptiv, t in prssur ypotsis, n t tory o stor n tir implitions or uturs pris n xpt utur spot pris Lvl II CFA Prorm Curriulum CFA Institut.

37 STUDY SESSION 14 Fix Inom Vlution Conpts Tis stuy sssion ovrs ssntil knowl n skills n or t vlution o ix inom invstmnts. It ins wit isussion o t trm strutur o intrst rts n intrst rt ynmis. T nxt rin rsss ritr- r vlution o ix- inom suritis. T stuy sssion onlus wit n introution to vlution n n nlysis o ons wit m options. READING ASSIGNMENTS Rin 42 Rin 43 Rin 44 T Trm Strutur n Intrst Rt Dynmis y Toms S.Y. Ho, Sn Bin L, n Stpn E. Wilox, CFA T Aritr- Fr Vlution Frmwork y Stvn V. Mnn, PD Vlution n Anlysis: Bons wit Em Options y Lsli Aro, Ionnis Goriou, CFA, n Anrw Kloty LEARNING OUTCOMES READING 42. THE TERM STRUCTURE AND INTEREST RATE DYNAMICS sri rltionsips mon spot rts, orwr rts, yil to mturity, xpt n rliz rturns on ons, n t sp o t yil urv; sri t orwr priin n orwr rt mols n lult orwr n spot pris n rts usin tos mols; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

38 Stuy Sssion 14 2 i j k l sri t ssumptions onrnin t volution o spot rts in rltion to orwr rts impliit in tiv on portolio mnmnt; sri t strty o riin t yil urv; xplin t swp rt urv, n wy n ow mrkt prtiipnts us it in vlution; lult n intrprt t swp spr or ult- r on; sri t Z- spr; sri t TED n Lior OIS sprs; xplin tritionl toris o t trm strutur o intrst rts n sri t implitions o tory or orwr rts n t sp o t yil urv; sri morn trm strutur mols n ow ty r us; xplin ow on s xposur to o t tors rivin t yil urv n msur n ow ts xposurs n us to mn yil urv risks; xplin t mturity strutur o yil voltilitis n tir t on pri voltility. READING 43. THE ARBITRAGE- FREE VALUATION FRAMEWORK xplin wt is mnt y ritr- r vlution o ix- inom instrumnt; lult t ritr- r vlu o n option- r, ix- rt oupon on; sri inomil intrst rt tr rmwork; sri t kwr inution vlution mtooloy n lult t vlu o ix- inom instrumnt ivn its s low t no; sri t pross o lirtin inomil intrst rt tr to mt spii trm strutur; ompr priin usin t zro- oupon yil urv wit priin usin n ritr- r inomil ltti; sri ptwis vlution in inomil intrst rt rmwork n lult t vlu o ix- inom instrumnt ivn its s lows lon pt; sri Mont Crlo orwr- rt simultion n its pplition. READING 44. VALUATION AND ANALYSIS: BONDS WITH EMBEDDED OPTIONS sri ix- inom suritis wit m options; xplin t rltionsips twn t vlus o lll or putl on, t unrlyin option- r (strit) on, n t m option; sri ow t ritr- r rmwork n us to vlu on wit m options; xplin ow intrst rt voltility ts t vlu o lll or putl on; xplin ow ns in t lvl n sp o t yil urv t t vlu o lll or putl on; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

39 Stuy Sssion 14 3 i j k l lult t vlu o lll or putl on rom n intrst rt tr; xplin t lultion n us o option- just sprs; xplin ow intrst rt voltility ts option- just sprs; lult n intrprt tiv urtion o lll or putl on; ompr tiv urtions o lll, putl, n strit ons; sri t us o on- si urtions n ky rt urtions to vlut t intrst rt snsitivity o ons wit m options; ompr tiv onvxitis o lll, putl, n strit ons; m lult t vlu o pp or loor lotin- rt on; n o p q sri inin turs o onvrtil on; lult n intrprt t omponnts o onvrtil on s vlu; sri ow onvrtil on is vlu in n ritr- r rmwork; ompr t risk rturn rtristis o onvrtil on wit t risk rturn rtristis o strit on n o t unrlyin ommon stok Lvl II CFA Prorm Curriulum CFA Institut.

40 STUDY SESSION 15 Fix Inom Topis in Fix Inom Anlysis Tis stuy sssion ins wit isussion o rit nlysis n ow rit stnrs t liquiity. It tn prsnts n ovrviw o suritiztion n t mjor typs o sst- k suritis n suritiz struturs. READING ASSIGNMENTS Rin 45 Rin 46 Crit Anlysis Mols y Rort A. Jrrow, PD, n Donl R. vn Dvntr Introution to Asst- Bk Suritis y Frnk J. Fozzi, CFA LEARNING OUTCOMES READING 45. CREDIT ANALYSIS MODELS xplin proility o ult, loss ivn ult, xpt loss, n prsnt vlu o t xpt loss, n sri t rltiv importn o ross t rit sptrum; xplin rit sorin n rit rtins, inluin wy ty r ll orinl rnkins; xplin strnts n wknsss o rit rtins; xplin struturl mols o orport rit risk, inluin wy quity n viw s ll option on t ompny s ssts; xplin ru orm mols o orport rit risk, inluin wy t n vlu s t sum o xpt isount s lows tr justin or risk; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

41 Stuy Sssion 15 2 i xplin ssumptions, strnts, n wknsss o ot struturl n ru orm mols o orport rit risk; xplin t trminnts o t trm strutur o rit sprs; lult n intrprt t prsnt vlu o t xpt loss on on ovr ivn tim orizon; ompr t rit nlysis rquir or sst- k suritis to nlysis o orport t. READING 46. INTRODUCTION TO ASSET- BACKED SECURITIES xplin nits o suritiztion or onomis n innil mrkts; sri t suritiztion pross, inluin t prtis to t pross, t rols ty ply, n t ll struturs involv; sri typs n rtristis o rsintil mort lons tt r typilly suritiz; sri typs n rtristis o rsintil mort- k suritis, n xplin t s lows n rit risk or typ; xplin t motivtion or rtin suritiz struturs wit multipl trns (.., olltrliz mort olitions), n t rtristis n risks o suritiz struturs; sri t rtristis n risks o ommril mort- k suritis; sri typs n rtristis o non- mort sst- k suritis, inluin t s lows n rit risk o typ; sri olltrliz t olitions, inluin tir s lows n rit risk Lvl II CFA Prorm Curriulum CFA Institut.

42 STUDY SESSION 16 Drivtiv Invstmnts Forwrs n Futurs Tis stuy sssion xmins rivtiv invstmnts n mrkts n ouss on rivtiv priin, vlution, n rit risk vlution. Assssin t rltiv ost/ nit o usin rivtiv instrumnts or invstmnts wit m rivtivs rquirs n unrstnin o t tors tt t vlution. Tis stuy sssion lso rsss intrst rt, quity, n urrny orwrs n uturs. READING ASSIGNMENTS Rin 47 Rin 48 Forwr Mrkts n Contrts Anlysis o Drivtivs or t Crtr Finnil Anlyst Prorm, y Don M. Cn, CFA Futurs Mrkts n Contrts Anlysis o Drivtivs or t Crtr Finnil Anlyst Prorm, y Don M. Cn, CFA LEARNING OUTCOMES READING 47. FORWARD MARKETS AND CONTRACTS xplin ow t vlu o orwr ontrt is trmin t initition, urin t li o t ontrt, n t xpirtion; lult n intrprt t pri n vlu o n quity orwr ontrt, ssumin ivins r pi itr isrtly or ontinuously; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

43 Stuy Sssion 16 2 lult n intrprt t pri n vlu o 1) orwr ontrt on ixinom surity, 2) orwr rt rmnt (FRA), n 3) orwr ontrt on urrny; vlut rit risk in orwr ontrt, n xplin ow mrkt vlu is msur o xposur to prty in orwr ontrt. READING 48. FUTURES MARKETS AND CONTRACTS xplin wy t uturs pri must onvr to t spot pri t xpirtion; trmin t vlu o uturs ontrt; xplin wy orwr n uturs pris ir; sri montry n nonmontry nits n osts ssoit wit olin t unrlyin sst, n xplin ow ty t t uturs pri; sri kwrtion n ontno; xplin t rltion twn uturs pris n xpt spot pris; sri t iiultis in priin Euroollr uturs n rtin pur ritr opportunity; lult n intrprt t pris o Trsury on uturs, stok inx uturs, n urrny uturs Lvl II CFA Prorm Curriulum CFA Institut.

44 STUDY SESSION 17 Drivtiv Invstmnts Options, Swps, n Intrst Rt n Crit Drivtivs Tis stuy sssion isusss options, swps, intrst rt rivtivs, n m rivtivs n tir vlution. Bus rivtivs r otn us to ru risk or nrt itionl inom, it is importnt to unrstn t rltiv ost/nit o rivtiv strtis. READING ASSIGNMENTS Rin 49 Rin 50 Rin 51 Rin 52 Option Mrkts n Contrts Anlysis o Drivtivs or t Crtr Finnil Anlyst Prorm, y Don M. Cn, CFA Swp Mrkts n Contrts Anlysis o Drivtivs or t Crtr Finnil Anlyst Prorm, y Don M. Cn, CFA Intrst Rt Drivtiv Instrumnts Fix Inom Anlysis or t Crtr Finnil Anlyst Prorm, Son Eition, y Frnk J. Fozzi, CFA Crit Dult Swps y Brin Ros n Don M. Cn, CFA 2015 Lvl II CFA Prorm Curriulum CFA Institut.

45 Stuy Sssion 17 2 LEARNING OUTCOMES READING 49. OPTION MARKETS AND CONTRACTS i j lult n intrprt t pris o syntti ll option, syntti put option, syntti on, n syntti unrlyin stok, n xplin wy n invstor woul wnt to rt su instrumnts; lult n intrprt pris o intrst rt options n options on ssts usin on- n two- prio inomil mols; xplin n vlut t ssumptions unrlyin t Blk Sols Mrton mol; xplin ow n option pri, s rprsnt y t Blk Sols Mrton mol, is t y n in t vlu o o t inputs; xplin t lt o n option, n monstrt ow it is us in ynmi in; xplin t mm t on n option s lt n ow mm n t lt ; xplin t t o t unrlyin sst s s lows on t pri o n option; trmin t istoril n impli voltilitis o n unrlyin sst; monstrt ow put ll prity or options on orwrs (or uturs) is stlis; ompr Amrin n Europn options on orwrs n uturs, n intiy t pproprit priin mol or Europn options. READING 50. SWAP MARKETS AND CONTRACTS i j istinuis twn t priin n vlution o swps; xplin t quivln o 1) intrst rt swps to sris o o- mrkt orwr rt rmnts (FRAs) n 2) plin vnill swp to omintion o n intrst rt ll n n intrst rt put; lult n intrprt t ix rt on plin vnill intrst rt swp n t mrkt vlu o t swp urin its li; lult n intrprt t ix rt, i pplil, n t orin notionl prinipl or ivn omsti notionl prinipl on urrny swp, n stimt t mrkt vlus o o t irnt typs o urrny swps urin tir livs; lult n intrprt t ix rt, i pplil, on n quity swp n t mrkt vlus o t irnt typs o quity swps urin tir livs; xplin n intrprt t rtristis n uss o swptions, inluin t irn twn pyr n rivr swptions; lult t pyos n s lows o n intrst rt swption; lult n intrprt t vlu o n intrst rt swption t xpirtion; vlut swp rit risk or prty n urin t li o t swp, istinuis twn urrnt rit risk n potntil rit risk, n xplin ow swp rit risk is ru y ot nttin n mrkin to mrkt; in swp spr n xplin its rltion to rit risk Lvl II CFA Prorm Curriulum CFA Institut.

46 Stuy Sssion 17 3 READING 51. INTEREST RATE DERIVATIVE INSTRUMENTS monstrt ow ot p n loor r pks o 1) options on intrst rts n 2) options on ix- inom instrumnts; lult t pyo or p n loor, n xplin ow ollr is rt. READING 52. CREDIT DEFAULT SWAPS sri rit ult swps (CDS), sinl- nm n inx CDS, n t prmtrs tt in ivn CDS prout; sri rit vnts n sttlmnt protools wit rspt to CDS; xplin t prinipls unrlyin, n tors tt inlun, t mrkt s priin o CDS; sri t us o CDS to mn rit xposurs n to xprss viws rrin ns in sp n/or lvl o t rit urv; sri t us o CDS to tk vnt o vlution ispritis mon sprt mrkts, su s ons, lons, quitis, n quity- link instrumnts Lvl II CFA Prorm Curriulum CFA Institut.

47 STUDY SESSION 18 Portolio Mnmnt Cpitl Mrkt Tory n t Portolio Mnmnt Pross T irst rin in tis stuy sssion rviws t CAPM (t pitl sst priin mol) ountion or tis stuy sssion n on o t irst riorous mols or t xpt rturns on risky ssts in quilirium. T son n tir rins isuss tiv portolio mnmnt n pply onpts rom t irst rin to it. T inl rin summrizs t portolio mnmnt pross, introuin topis tt will ovr in mor til t Lvl III. READING ASSIGNMENTS Rin 53 Rin 54 Rin 55 Rin 56 Portolio Conpts Quntittiv Mtos or Invstmnt Anlysis, Son Eition, y Rir A. DFuso, CFA, Dnnis W. MLvy, CFA, Jrl E. Pinto, CFA, n Dvi E. Runkl, CFA Rsiul Risk n Rturn: T Inormtion Rtio Ativ Portolio Mnmnt: A Quntittiv Appro or Proviin Suprior Rturns n Controllin Risk, y Rir C. Grinol n Ronl N. Kn T Funmntl Lw o Ativ Mnmnt Ativ Portolio Mnmnt: A Quntittiv Appro or Proviin Suprior Rturns n Controllin Risk, y Rir C. Grinol n Ronl N. Kn T Portolio Mnmnt Pross n t Invstmnt Poliy Sttmnt Mnin Invstmnt Portolios: A Dynmi Pross, Tir Eition, Jon L. Minn, CFA, Donl L. Tuttl, CFA, Dnnis W. MLvy, CFA, n Jrl E. Pinto, CFA, itors 2015 Lvl II CFA Prorm Curriulum CFA Institut.

48 Stuy Sssion 18 2 A NOTE ON THE TERMINOLOGY OF ACTIVE PORTFOLIO MANAGEMENT T ollowin list ins trms s ty r us in Rins 58 n 59 (Cptrs 5 n 6 o Grinol n Kn s Ativ Portolio Mnmnt). Altou som o t trms n initions r isuss lswr in t CFA Prorm Curriulum, trminoloy in Grinol n Kn s ook is in som ss istintiv. Ty ous on quitis, ut t nlysis pplis to ons, urrnis, n otr sst lsss s wll. Risk Bnmrk portolio Exss rturn Ativ rturn Ativ risk Rsiul risk Rsiul rturn Ativ position Vlu Bnmrk timin MMI t stnr vition o rturn. portolio wit risk n rturn rtristis rprsnttiv o t invstmnt univrs n styl o n invstmnt mnr; t portolio is us or prormn msurmnt o invstmnt orts. t rturn on n sst (or portolio o ssts) in xss o t risk- r rt. t rturn on portolio in xss o its nmrk. t stnr vition o tiv rturn. Tis risk is lso otn rrr to s t trkin rror. t portion o tiv risk tt nnot ttriut to t t (systmti risk) o t portolio. t rturn o portolio in xss o its nmrk, just or t irn in t. t irn twn portolio n nmrk olins o surity. t (tiv) rturn on n invstmnt. t oi o n tiv t, prio y prio. rrs to t Nw York Stok Exn (NYSE) Ar Mjor Mrkt Inx, prviously known s t Amrin Stok Exn (AMEX) Mjor Mrkt Inx (tikr o XMI or MMI). It is pri- wit vr o 20 Blu Cip inustril stoks o mjor U.S. Corportions; svrl o t stoks r lso omponnts o t Dow Jons Inustril Avr (DJIA). LEARNING OUTCOMES READING 53. PORTFOLIO CONCEPTS xplin mn vrin nlysis n its ssumptions, n lult t xpt rturn n t stnr vition o rturn or portolio o two or tr ssts; sri t minimum- vrin n iint rontirs, n xplin t stps to solv or t minimum- vrin rontir; xplin t nits o ivrsiition n ow t orrltion in two- sst portolio n t numr o ssts in multi- sst portolio t t ivrsiition nits; lult t vrin o n qully wit portolio o n stoks, xplin t pitl llotion n pitl mrkt lins (CAL n CML) n t rltion twn tm, n lult t vlu o on o t vrils ivn vlus o t rminin vrils; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

49 Stuy Sssion 18 3 i j k l xplin t pitl sst priin mol (CAPM), inluin its unrlyin ssumptions n t rsultin onlusions; xplin t surity mrkt lin (SML), t t oiint, t mrkt risk prmium, n t Srp rtio, n lult t vlu o on o ts vrils ivn t vlus o t rminin vrils; xplin t mrkt mol, n stt n intrprt t mrkt mol s pritions wit rspt to sst rturns, vrins, n ovrins; lult n just t, n xplin t us o just n istoril ts s pritors o utur ts; xplin rsons or n prolms rlt to instility in t minimum- vrin rontir; sri n ompr mroonomi tor mols, unmntl tor mols, n sttistil tor mols; lult t xpt rturn on portolio o two stoks, ivn t stimt mroonomi tor mol or stok; sri t ritr priin tory (APT), inluin its unrlyin ssumptions n its rltion to t multitor mols, lult t xpt rturn on n sst ivn n sst s tor snsitivitis n t tor risk prmiums, n trmin wtr n ritr opportunity xists, inluin ow to xploit t opportunity; m xplin sours o tiv risk, intrprt trkin rror, trkin risk, n t inormtion rtio, n xplin tor portolio n trkin portolio; n ompr unrlyin ssumptions n onlusions o t CAPM n APT mol, n xplin wy n invstor n possily rn sustntil prmium or xposur to imnsions o risk unrlt to mrkt movmnts. READING 54. RESIDUAL RISK AND RETURN: THE INFORMATION RATIO in t trms lp n inormtion rtio in ot tir x post n x nt snss; ompr t inormtion rtio n t lp s T- sttisti; xplin t ojtiv o tiv mnmnt in trms o vlu ; lult t optiml lvl o rsiul risk to ssum or ivn lvls o mnr ility n invstor risk vrsion; justiy wy t oi or prtiulr tiv strty os not pn on invstor risk vrsion. READING 55. THE FUNDAMENTAL LAW OF ACTIVE MANAGEMENT in t trms inormtion oiint n rt n sri ow ty omin to trmin t inormtion rtio; sri ow t optiml lvl o rsiul risk o n invstmnt strty ns wit inormtion oiint n rt, n ow t vlu o n invstmnt strty ns wit inormtion oiint n rt; 2015 Lvl II CFA Prorm Curriulum CFA Institut.

50 Stuy Sssion 18 4 ontrst mrkt timin n surity sltion in trms o rt n rquir invstmnt skill; sri ow t inormtion rtio ns wn t oriinl invstmnt strty is umnt wit otr strtis or inormtion sours; sri t ssumptions on wi t unmntl lw o tiv mnmnt is s. READING 56. THE PORTFOLIO MANAGEMENT PROCESS AND THE INVESTMENT POLICY STATEMENT xplin t importn o t portolio prsptiv; sri t stps o t portolio mnmnt pross n t omponnts o tos stps; xplin t rol o t invstmnt poliy sttmnt in t portolio mnmnt pross, n sri t lmnts o n invstmnt poliy sttmnt; xplin ow pitl mrkt xpttions n t invstmnt poliy sttmnt lp inlun t strti sst llotion ision n ow n invstor s invstmnt tim orizon my inlun t invstor s strti sst llotion; in invstmnt ojtivs n onstrints, n xplin n istinuis mon t typs o invstmnt ojtivs n onstrints; ontrst t typs o invstmnt tim orizons, trmin t tim orizon or prtiulr invstor, n vlut t ts o tis tim orizon on portolio oi; justiy til onut s rquirmnt or mnin invstmnt portolios Lvl II CFA Prorm Curriulum CFA Institut.