CFA Program Curriculum 2017 Level II, Volumes 1 – 6

Master the practical aspects of the CFA Program Curriculum with expert instruction for the 2017 exam The same official curricula that CFA Program candidates receive with program registration is now publicly available for purchase. CFA Program Curriculum 2017 Level II, Volumes 1–6 provides the complete Level II Curriculum for the 2017 exam, with practical instruction on the Candidate Body of Knowledge (CBOK) and how it is applied, including expert guidance on incorporating concepts into practice. Level II focuses on complex analysis with an emphasis on asset valuation, and is designed to help you use investment concepts appropriately in situations analysts commonly face. Coverage includes ethical and professional standards, quantitative analysis, economics, financial reporting and analysis, corporate finance, equities, fixed income, derivatives, alternative investments, and portfolio management organized into individual study sessions with clearly defined Learning Outcome Statements. Charts, graphs, figures, diagrams, and financial statements illustrate complex concepts to facilitate retention, and practice questions with answers allow you to gauge your understanding while reinforcing important concepts. While Level I introduced you to basic foundational investment skills, Level II requires more complex techniques and a strong grasp of valuation methods. This set dives deep into practical application, explaining complex topics to help you understand and retain critical concepts and processes. Incorporate analysis skills into case evaluationsMaster complex calculations and quantitative techniquesUnderstand the international standards used for valuation and analysisGauge your skills and understanding against each Learning Outcome Statement CFA Institute promotes the highest standards of ethics, education, and professional excellence among investment professionals. The CFA Program Curriculum guides you through the breadth of knowledge required to uphold these standards. The three levels of the program build on each other. Level I provides foundational knowledge and teaches the use of investment tools; Level II focuses on application of concepts and analysis, particularly in the valuation of assets; and Level III builds toward synthesis across topics with an emphasis on portfolio management.

Table of Contents:
How to Use the CFA Program Curriculum ix Curriculum Development Process ix Organization of the Curriculum x Features of the Curriculum x Designing Your Personal Study Program xi Feedback xiii Ethical and Professional Standards Study Session 1 Ethical and Professional Standards 3 Reading 1 Code of Ethics and Standards of Professional Conduct 5 Preface 5 Evolution of the CFA Institute Code of Ethics and Standards of Professional Conduct 6 Standards of Practice Handbook 6 Summary of Changes in the Eleventh Edition 7 CFA Institute Professional Conduct Program 9 Adoption of the Code and Standards 10 Acknowledgments 10 Ethics and the Investment Industry 11 Why Ethics Matters 11 CFA Institute Code of Ethics and Standards of Professional Conduct 15 Preamble 15 The Code of Ethics 15 Standards of Professional Conduct 16 Reading 2 Guidance for Standards I VII 21 Standard I: Professionalism 21 Standard I(A) Knowledge of the Law 21 Guidance 21 Recommended Procedures for Compliance 26 Application of the Standard 27 Standard I(B) Independence and Objectivity 30 Guidance 30 Recommended Procedures for Compliance 35 Application of the Standard 36 Standard I(C) Misrepresentation 43 Guidance 43 Recommended Procedures for Compliance 46 Application of the Standard 48 Standard I(D) Misconduct 53 Guidance 53 Recommended Procedures for Compliance 54 Application of the Standard 54 Standard II: Integrity of Capital Markets 56 Standard II(A) Material Nonpublic Information 56 Guidance 56 Recommended Procedures for Compliance 60 Application of the Standard 63 Standard II(B) Market Manipulation 68 Guidance 68 Application of the Standard 69 Standard III: Duties to Clients 73 Standard III(A) Loyalty, Prudence, and Care 73 Guidance 73 Recommended Procedures for Compliance 77 Application of the Standard 78 Standard III(B) Fair Dealing 82 Guidance 82 Recommended Procedures for Compliance 84 Application of the Standard 86 Standard III(C) Suitability 90 Guidance 90 Recommended Procedures for Compliance 93 Application of the Standard 94 Standard III(D) Performance Presentation 97 Guidance 97 Recommended Procedures for Compliance 98 Application of the Standard 98 Standard III(E) Preservation of Confidentiality 101 Guidance 101 Recommended Procedures for Compliance 103 Application of the Standard 103 Standard IV: Duties to Employers 105 Standard IV(A) Loyalty 105 Guidance 105 Recommended Procedures for Compliance 109 Application of the Standard 109 Standard IV(B) Additional Compensation Arrangements 116 Guidance 116 Recommended Procedures for Compliance 116 Application of the Standard 116 Standard IV(C) Responsibilities of Supervisors 118 Guidance 118 Recommended Procedures for Compliance 120 Application of the Standard 122 Standard V: Investment Analysis, Recommendations, and Actions 126 Standard V(A) Diligence and Reasonable Basis 126 Guidance 126 Recommended Procedures for Compliance 130 Application of the Standard 130 Standard V(B) Communication with Clients and Prospective Clients 137 Guidance 138 Recommended Procedures for Compliance 140 Application of the Standard 141 Standard V(C) Record Retention 146 Guidance 146 Recommended Procedures for Compliance 147 Application of the Standard 148 Standard VI: Conflicts of Interest 149 Standard VI(A) Disclosure of Conflicts 149 Guidance 149 Recommended Procedures for Compliance 152 Application of the Standard 152 Standard VI(B) Priority of Transactions 157 Guidance 157 Recommended Procedures for Compliance 158 Application of the Standard 160 Standard VI(C) Referral Fees 162 Guidance 162 Recommended Procedures for Compliance 162 Application of the Standard 162 Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate 165 Standard VII(A) Conduct as Participants in CFA Institute Programs 165 Guidance 165 Application of the Standard 167 Standard VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program 170 Guidance 170 Recommended Procedures for Compliance 174 Application of the Standard 174 Practice Problems 177 Solutions 196 Reading 3 CFA Institute Research Objectivity Standards 209 Guiding Principles 209 Comparison with the New York Stock Exchange and National Association of Securities Dealers Rules 210 Overview of the CFA Institute Research Objectivity Standards 210 Definitions 211 Investment Banks, Broker–Dealers and Other Firms That Sell Research 213 Requirements 213 Recommended Procedures for Compliance 215 Practice Problems 222 Solutions 224 Study Session 2 Ethical and Professional Standards: Application 225 Reading 4 The Glenarm Company 227 Case Facts 227 Sherman s Background 227 Glenarm 228 The Transition 228 Case Discussion 229 Loyalty to One s Employer 229 Disclosure of Additional Compensation and Conflicts 230 Reading 5 Preston Partners 233 Case Facts 233 Case Discussion 235 Responsibilities to Clients and Interactions with Clients 235 Allocation of Trades 236 Responsibilities of Supervisors 237 Reading 6 Super Selection 239 Case Facts 239 Case Discussion 240 Responsibilities of Supervisors 241 Employees and the Employer/Supervisor 241 Reasonable Basis 242 Duties to Clients 242 Investment Recommendations and Actions 243 Priority of Transactions 243 Reading 7 Trade Allocation: Fair Dealing and Disclosure 245 Reading 8 Changing Investment Objectives 249 Quantitative Methods Study Session 3 Quantitative Methods for Valuation 253 Reading 9 Correlation and Regression 255 Introduction 256 Correlation Analysis 256 Scatter Plots 256 Correlation Analysis 257 Calculating and Interpreting the Correlation Coefficient 260 Limitations of Correlation Analysis 262 Uses of Correlation Analysis 265 Testing the Significance of the Correlation Coefficient 273 Linear Regression 276 Linear Regression with One Independent Variable 276 Assumptions of the Linear Regression Model 280 The Standard Error of Estimate 282 The Coefficient of Determination 285 Hypothesis Testing 287 Analysis of Variance in a Regression with One Independent Variable 295 Prediction Intervals 298 Limitations of Regression Analysis 301 Summary 301 Practice Problems 304 Solutions 313 Reading 10 Multiple Regression and Issues in Regression Analysis 317 Introduction 318 Multiple Linear Regression 318 Assumptions of the Multiple Linear Regression Model 324 Predicting the Dependent Variable in a Multiple Regression Model 329 Testing whether All Population Regression Coefficients Equal Zero 331 Adjusted R2 333 Using Dummy Variables in Regressions 334 Violations of Regression Assumptions 338 Heteroskedasticity 339 Serial Correlation 345 Multicollinearity 349 Heteroskedasticity, Serial Correlation, Multicollinearity: Summarizing the Issues 352 Model Specification and Errors in Specification 353 Principles of Model Specification 353 Misspecified Functional Form 354 Time–Series Misspecification (Independent Variables Correlated with Errors) 363 Other Types of Time–Series Misspecification 366 Models with Qualitative Dependent Variables 366 Summary 369 Practice Problems 373 Solutions 391 Reading 11 Time–Series Analysis 401 Introduction to Time–Series Analysis 402 Challenges of Working with Time Series 404 Trend Models 405 Linear Trend Models 405 Log–Linear Trend Models 408 Trend Models and Testing for Correlated Errors 414 Autoregressive (AR) Time–Series Models 415 Covariance–Stationary Series 416 Detecting Serially Correlated Errors in an Autoregressive Model 417 Mean Reversion 420 Multiperiod Forecasts and the Chain Rule of Forecasting 421 Comparing Forecast Model Performance 424 Instability of Regression Coefficients 426 Random Walks and Unit Roots 429 Random Walks 429 The Unit Root Test of Nonstationarity 433 Moving–Average Time–Series Models 437 Smoothing Past Values with an n–Period Moving Average 438 Moving–Average Time–Series Models for Forecasting 440 Seasonality in Time–Series Models 442 Autoregressive Moving–Average Models 448 Autoregressive Conditional Heteroskedasticity Models 449 Regressions with More than One Time Series 452 Other Issues in Time Series 456 Suggested Steps in Time–Series Forecasting 456 Summary 458 Practice Problems 461 Solutions 471 Reading 12 Excerpt from Probabilistic Approaches: Scenario Analysis, Decision Trees, and Simulations 477 Introduction 477 Simulations 478 Steps in Simulation 478 An Example of a Simulation 481 Use in Decision Making 484 Simulations with Constraints 485 Issues 486 Risk–Adjusted Value and Simulations 487 An Overall Assessment of Probabilistic Risk Assessment Approaches 488 Comparing the Approaches 488 Complement or Replacement for Risk–Adjusted Value 489 In Practice 490 Conclusion 491 Economics Study Session 4 Economics for Valuation 495 Reading 13 Currency Exchange Rates: Determination and Forecasting 497 Introduction 498 Foreign Exchange Market Concepts 500 Arbitrage Constraints on Spot Exchange Rate Quotes 503 Forward Markets 507 A Long–Term Framework for Exchange Rates 516 International Parity Conditions 518 Assessing an Exchange Rate s Equilibrium Level 535 Tying It Together: A Model That Includes Long–Term Equilibrium 538 The Carry Trade 539 The Impact of Balance of Payments Flows 543 Current Account Imbalances and the Determination of Exchange Rates 543 Capital Flows and the Determination of Exchange Rates 547 Monetary and Fiscal Policies 555 The Mundell Fleming Model 555 Monetary Models of Exchange Rate Determination 558 The Taylor Rule and the Determination of Exchange Rates 559 Monetary Policy and Exchange Rates The Historical Evidence 561 Fiscal Policy and the Determination of Exchange Rates 565 Exchange Rate Management: Intervention and Controls 567 Currency Crises 572 Shorter–Term Forecasting Tools 575 Technical Analysis 576 Order Flow, Sentiment, and Positioning 578 Summary 581 Appendix 587 Practice Problems 588 Solutions 593 Reading 14 Economic Growth and the Investment Decision 597 Introduction 598 Growth in the Global Economy: Developed vs. Developing Countries 598 Savings and Investment 601 Financial Markets and Intermediaries 601 Political Stability, Rule of Law, and Property Rights 602 Education and Health Care Systems 602 Tax and Regulatory Systems 603 Free Trade and Unrestricted Capital Flows 603 Summary of Factors Limiting Growth in Developing Countries 604 Why Potential Growth Matters to Investors 606 Determinants of Economic Growth 611 Production Function 611 Capital Deepening vs. Technological Progress 613 Growth Accounting 615 Extending the Production Function 617 Natural Resources 617 Labor Supply 619 Labor Quality: Human Capital 624 Capital: ICT and Non–ICT 625 Technology 627 Public Infrastructure 631 Summary 631 Theories of Growth 636 Classical Model 637 Neoclassical Model 637 Endogenous Growth Theory 649 Convergence Debate 652 Growth in an Open Economy 656 Summary 664 Practice Problems 668 Solutions 675 Reading 15 Economics of Regulation 679 Introduction 679 Overview of Regulation 680 Classification of Regulations and Regulators 680 Economic Rationale for Regulation 683 Regulatory Tools 686 Regulation of Commerce 691 Regulation of Financial Markets 695 Cost Benefit Analysis of Regulation 696 Analysis of Regulation 698 Effects of Regulations 700 Summary 703 Practice Problems 706 Solutions 708 Appendices 709 Glossary G–1 Index I–1