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LOS-2023

a: Interpret interest rates as required rates of return, discount rates, or opportunity costs.

b: Explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk.

c: Calculate and interpret the future value (FV) and present value (PV) of a single sum of money, an ordinary annuity, an annuity due, a perpetuity (PV only), and a series of unequal cash flows.

d: Demonstrate the use of a time line in modeling and solving time value of money problems.

e: Calculate the solution for time value of money problems with different frequencies of compounding.

f: Calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding.

a: Identify and compare data types.

b: Describe how data are organized for quantitative analysis.

c: Interpret frequency and related distributions.

d: Interpret a contingency table.

e: Describe ways that data may be visualized and evaluate uses of specific visualizations.

f: Describe how to select among visualization types.

g: Calculate and interpret measures of central tendency.

h: Evaluate alternative definitions of mean to address an investment problem.

i: Calculate quantiles and interpret related visualizations.

j: Calculate and interpret measures of dispersion.

k: Calculate and interpret target downside deviation.

l: Interpret skewness.

m: Interpret kurtosis.

n: Interpret correlation between two variable.

a: Define a random a variable, an outcome, and an event. 

b: Identify the two defining properties of probability, including mutually exclusive and exhaustive events, and compare and contrast empirical, subjective, and a priori probabilities.

c: Describe the probability of an event in terms of odds for and against the event.

d: Calculate and interpret conditional probabilities.

e: Demonstrate the application of the multiplication and addition rules for probability.

f: Compare and contrast dependent and independent events.

g: Calculate and interpret an unconditional probability using the total probability rule.

h: Calculate and interpret the expected value, variance, and standard deviation of random variables.

i: Explain the use of conditional expectation in investment applications.

j: Interpret a probability tree and demonstrate its application to investment problems.

k: Calculate and interpret the expected value, variance, standard deviation, covariances, and correlations of portfolio returns.

l: Calculate and interpret the covariances of portfolio returns using the joint probability function.

m: Calculate and interpret an updated probability using Bayes’ formula.

n: Identify the most appropriate method to solve a particular counting problem and analyze counting problems using factorial, combination, and permutation concepts.

a: Define a probability distribution and compare and contrast discrete and continuous random variables and their probability functions.

b: Calculate and interpret probabilities for a random variable given its cumulative distribution function.

c: Describe the properties of a discrete uniform random variable, and calculate and interpret probabilities given the discrete uniform distribution function.

d: Describe the properties of the continuous uniform distribution, and calculate and interpret probabilities given a continuous uniform distribution.

e: Describe the properties of a Bernoulli random variable and a binomial random variable, and calculate and interpret probabilities given the binomial distribution function.

f: Explain the key properties of the normal distribution.

g: Contrast a multivariate distribution and a univariate distribution, and explain the role of correlation in the multivariate normal distribution.

h: Calculate the probability that a normally distributed random variable lies inside a given interval.

i: Explain how to standardize a random variable.

j: Calculate and interpret probabilities using the standard normal distribution.

k: Define shortfall risk, calculate the safety-first ratio, and identify an optimal portfolio using Roy’s safety-first criterion.

l: Explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices.

m: Calculate and interpret a continuously compounded rate of return, given a specific holding period return.

n: Describe the properties of the Student’s t-distribution, and calculate and interpret its degrees of freedom.

o: Describe the properties of the chi-square distribution and the Distribution, and calculate and interpret their degrees of freedom.

p: Describe Monte Carlo simulation.

a: Compare and contrast probability samples with non-probability samples and discuss applications of each to an investment problem.

b: Explain sampling error.

c: Compare and contrast simple random, stratified random, cluster, convenience, and judgmental sampling.

d: Explain the central limit theorem and its importance.

e: Calculate and interpret the standard error of the sample mean.

f: Identify and describe desirable properties of an estimator.

g: Contrast a point estimate and a confidence interval estimate of a population parameter.

h: Calculate and interpret a confidence interval for a population mean, given a normal distribution with 1) a known population variance, 2) an unknown population variance, or 3) an unknown population variance and a large sample size. 

i: Describe the use of resampling (bootstrap, jackknife) to estimate the sampling distribution of a statistic.

j: Describe the issues regarding selection of the appropriate sample size, data snooping bias, sample selection bias, survivorship bias, look-ahead bias, and time-period bias.

a: Define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and alternative hypotheses.

b: Compare and contrast one-tailed and two-tailed tests of hypotheses.

c: Explain a test statistic, Type I and Type II errors, a significance level, how significance levels are used in hypothesis testing, levels are used in hypothesis testing, and the power of a test.

d: Explain a decision rule and the relation between confidence intervals and hypothesis tests, and determine whether a statistically significant result is also economically meaningful.

e: Explain and interpret the p-value as it relates to hypothesis testing.

f: Describe how to interpret the significance of a test in the context of multiple tests.

g: Identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of both large and small samples when the population is normally or approximately normally distributed and the variance is 1) known or 2) unknown. 

h: Identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the population means of two at least approximately normally distributed populations based on independent random samples with equal assumed variances. 

i: Identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of two normally distributed populations.

j: Identify the appropriate test statistic and interpret the results for a hypothesis test concerning (1) the variance of a normally distributed population and (2) the equality of the variances of two normally distributed populations based on two independent random samples.

k: Compare and contrast parametric and nonparametric tests, and describe situations where each is the more appropriate type of test.

l: Explain parametric and nonparametric tests of the hypothesis that the population correlation coefficient equals zero, and determine whether the hypothesis is rejected at a given level of significance.

m: Explain tests of independence based on contingency table data.

a: Describe a simple linear regression model and the roles of the dependent and independent variables in the model.

b: Describe the least squares criterion, how it is used to estimate regression coefficients, and their interpretation.

c: Explain the assumptions underlying the simple linear regression model, and describe how residuals and residual plots indicate if these assumptions may have been violated.

d: Calculate and interpret the coefficient of determination and the F-statistic in a simple linear regression. 

e: Describe the use of analysis of variance (ANOVA) in regression analysis, interpret ANOVA results, and calculate and
interpret the standard error of estimate in a simple linear regression.

f: Formulate a null and an alternative hypothesis about a population value of a regression coefficient, and determine whether the null hypothesis is rejected at a given level of significance.

g: Calculate and interpret the predicted value for the dependent variable, and a prediction interval for it, given an estimated linear regression model and a value for the independent variable.

h: Describe different functional forms of simple linear regressions.

a: Calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure.

b: Compare substitution and income effects.

c: Contrast normal goods with inferior goods.

d: Describe the phenomenon of diminishing marginal returns.

e: Determine and interpret breakeven and shutdown points of production.

f: Describe how economies of scale and diseconomies of scale affect costs.

a: Describe characteristics of perfect competition, monopolistic competition, oligopoly, and pure monopoly.

b: Explain relationships between price, marginal revenue, marginal cost, economic profit, and the elasticity of demand under each market structure. 

c: Describe a firm's supply function under each market structure. 

d: Describe and determine the optimal price and output for firms under each market structure.

e: Explain factors affecting long-run equilibrium under each market structure.

f: Describe pricing strategy under each market structure.

g: Describe the use and limitations of concentration measures in identifying market structure. 

h: Identify the type of market structure within which a firm operates. 

a: Explain how the aggregate demand curve is generated.

b: Explain the aggregate supply curve in the short run and long run.

c: Explain causes of movements along and shifts in aggregate demand and supply curves.

d: Describe how fluctuations in aggregate demand and aggregate supply cause short-run changes in the economy and the business cycle. 

e: Distinguish among the following types of macroeconomic equilibria: long-run full employment, short-run recessionary gap, short-run inflationary gap, and short-run stagflation.

f: Explain how a short-run macroeconomic equilibrium may occur at a level above or below full employment.

g: Analyze the effect of combined changes in aggregate supply and demand on the economy.

h: Describe sources, measurement, and sustainability of economic growth.

i: Describe the production function approach to analyzing the sources of economic growth. 

j: Define and contrast input growth with growth of total factor productivity as components of economic growth.

k: Calculate and explain gross domestic product (GDP) using expenditure and income approaches.

l: Compare the sum-of-value-added and value-of-final-output methods of calculating GDP. 

m: Compare nominal and real GDP and calculate and interpret the GDP deflator.

n: Compare GDP, national income, personal income, and personal disposable income.

o: Explain the fundamental relationship among saving, investment, the fiscal, balance, and the trade balance.

a: Describe the business cycle and its phases.

b: Describe credit cycles.

c: Describe how resource use, consumer and business activity, housing sector activity, and external trade sector activity vary as an economy moves through the business cycle.

d: Describe theories of the business cycle.

e: Interpret a set of economic indicators and describe their uses and limitations.

f: Describe types of unemployment and compare measures of unemployment. 

g: Explain inflation, hyperinflation, disinflation, deflation.

h: Explain the construction of indexes used to measure inflation.

i: Compare inflation measures, including their uses and limitations.

j: Contrast cost-push and demand-pull inflation.

a: Compare monetary and fiscal policy. 

b: Describe functions and definitions of money.

c: Explain the money creation process.

d: Describe theories of the demand for and supply of money.

e: Describe the Fisher effect.

f: Describe roles and objectives of central banks.

g: Contrast the costs of expected and unexpected inflation.

h: Describe tools used to implement monetary policy.

i: Describe the monetary transmission mechanism.

j: Describe qualities of effective central banks.

k: Explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates.

l: Contrast the use of inflation, interest rate, and exchange rate targeting by central banks. 

m: Determine whether a monetary policy is expansionary or contractionary.

n: Describe limitations of monetary policy.

o: Describe roles and objectives of fiscal policy.

p: Describe tools of fiscal policy, including their advantages and disadvantages.

q: Describe the arguments about whether the size of a national debt relative to GDP matters.

r: Explain the implementation of implementation.

s: Determine whether a fiscal policy is expansionary or contractionary. 

t: Explain the interaction of monetary and fiscal policy. 

a: Describe geopolitics from a cooperation versus competition perspective.
b: Describe geopolitics and its relationship with globalization.
c: Describe tools of geopolitics and their impact on regions and economies.
d: Describe geopolitical risk and its impact on investments.

a: Compare gross domestic product and gross national product.

b: Describe benefits and costs of international trade.

c: Contrast comparative advantage and absolute advantage.

d: Compare the Ricardian and Heckscher–Ohlin models of trade and the source(s) of comparative advantage in each model.

e: Compare types of trade and capital restrictions and their economic implications. 

f: Explain motivations for and advantages of trading blocs, common markets, and economic unions.

g: Describe common objectives of capital restrictions imposed by governments.

h: Describe the balance of payments accounts including their components.

i: Explain how decisions by consumers, firms, and governments affect the balance of payments.

j: Describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization. 

a: Define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates.

b: Describe functions of and participants in the foreign exchange market.

c: Calculate and interpret the percentage change in a currency relative to another currency. 

d: Calculate and interpret currency cross-rates.

e: Calculate an outright forward quotation from forward quotations expressed on a points basis or in percentage terms. 

f: Explain the arbitrage relationship between spot rates, forward rates, and interest rates.

g: Calculate and interpret a forward discount or premium.

h: Calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency.

i: Describe exchange rate regimes.

j: Explain the effects of exchange rates on countries’ international trade and capital flows.

a: Describe the roles of financial reporting and statement analysis.

b: Describe the roles of the statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows in evaluating a company’s performance and financial position.

c: Describe the importance of financial statement notes and supplementary information—including disclosures of accounting policies, methods, and estimates—and management’s commentary. 

d: Describe the objective of audits of financial statements, the types of audit reports, and the importance of effective internal controls. 

e: Identify and describe information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information.

f: Describe the steps in the financial statement analysis framework.

a: Describe the objective of importance of financial reporting standards in security analysis and valuation.

b: Describe the roles of financial reporting standard-setting bodies and regulatory authorities in establishing and enforcing reporting standards. 

c: Describe the International Accounting Standards Board’s conceptual framework, including qualitative characteristics of financial reports, constraints on financial reports, and required reporting elements.

d: Describe general requirements for financial statements under International Financial Reporting Standards (IFRS). 

e: Describe implications for financial analysis of alternative financial reporting systems and the importance of monitoring developments in financial reporting standards.

a: Describe the components of the income statement and alternative presentation formats of that statement.

b: Describe general principles of revenue recognition and accounting standards for revenue recognition. 

c: Calculate revenue given information that might in the choice of revenue recognition method.

d: Describe general principles of expense recognition, specific expense recognition applications, and implications of expense recognition choices for financial analysis. 

e: Describe the financial reporting treatment and analysis of non-recurring items (including discontinued operations, unusual or infrequent items) and changes in accounting policies.

f: Contrast the operating and non-operating components of the income statement.

g: Describe how earnings per share is calculated and calculate and interpret a company’s earnings per share (both basic and diluted earnings per share) for both simple and complex capital structures.

h: Contrast dilutive and antidilutive securities and describe the implications of each for the earnings per share calculation. 

i: Formulate income statements into common-size income statements. 

j: Evaluate a company’s financial performance using common-size income statements and financial ratios based on the income statement.

k: Describe, calculate, and interpret comprehensive income.

l: Describe other comprehensive income and identify major types of items included in it. 

a: Describe the elements of the balance sheet: assets, liabilities, and equity.

b: Describe uses and limitations of the balance sheet in financial analysis.

c: Describe alternative formats of balance sheet presentation.

d: Contrast current and non-current assets and current and non-current liabilities. 

e: Describe different types of assets and liabilities and the measurement bases of each.

f: Describe the components of shareholders’ equity

g: Demonstrate the conversion of balance sheets to common-size balance sheets and interpret common-size balance sheets.

h: Calculate and interpret liquidity and solvency ratios.

a: Compare cash flows from operating, investing, and financing activities and classify cash flow items as relating to one of those three categories given a description of the items.

b: Describe how non-cash investing and financing activities are reported. 

c: Contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP).

d: Compare and contrast the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method. 

e: Describe how the cash flow statement is linked to the income statement and the balance sheet.

f: Describe the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data.

g: Demonstrate the conversion of cash flows from the indirect to direct method.

h: Analyze and interpret both reported and common-size cash flow statements.

i: Calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios.

a: Describe tools and techniques used in financial analysis, including their uses and limitations. 

b: Identify, calculate, and interpret activity, liquidity, solvency, profitability, and valuation ratios.

c: Describe relationships among ratios and evaluate a company using ratio analysis. 

d: Demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components.

e: Calculate and interpret ratios used in equity analysis and credit analysis. 

f: Explain the requirements for segment reporting and calculate and interpret segment ratios.

g: Describe how ratio analysis and other techniques can be used to model and forecast earnings.

a: Contrast costs included in inventories and costs recognised as expenses in the period in which they are incurred. 

b: Describe different inventory valuation methods (cost formulas).

c: Calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems. 

d: Calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods.

e: Explain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios.

f: Demonstrate the conversion of a company’s reported financial statements from LIFO to FIFO for purposes of comparison.

g: Describe the measurement of inventory at the lower of cost and net realisable value.

h: Describe implications of valuing inventory at net realisable value for financial statements and ratios.

i: Describe the financial statement presentation of and disclosures relating to inventories. 

j: Explain issues that analysts should consider when examining a company’s inventory disclosures and other sources of information.

k: Calculate and compare ratios of companies, including companies that use different inventory methods.

l: Analyze and compare the financial statements of companies, including companies that use different inventory methods.

a: Compare the financial reporting of the following types of intangible assets: purchased, internally developed, acquired in a business combination.

b: Explain and evaluate how capitalising versus expensing costs in the period in which they are incurred affects financial statements and ratios.

c: Describe the different depreciation methods for property, plant, and equipment and calculate depreciation expense.

d: Describe how the choice of depreciation method and assumptions concerning useful life and residual value affect depreciation expense, financial statements, and ratios.

e: Explain and evaluate how impairment, revaluation, and derecognition of property, plant, and equipment and intangible assets affect financial statements and ratios. 

f: Describe the different amortisation methods for intangible assets with finite lives and calculate amortisation expense. 

g: Describe how the choice of amortisation method and assumptions concerning useful life and residual value affect amortisation expense, financial statements, and ratios.

h: Describe the revaluation model.

i: Explain the impairment of property, plant, and equipment and intangible assets. 

j: Explain the derecognition of property, plant, and equipment and intangible assets.

k: Describe the financial statement presentation of and disclosures relating to property, plant, and equipment and intangible assets.

l: Analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets.

m: Compare the financial reporting of investment property with that of property, plant, and equipment.

n: Identify and contrast costs that are capitalised and costs that are expensed in the period in which they are incurred.

 

 

a: Describe the differences between accounting profit and taxable income and define key terms, including deferred tax assets, deferred tax liabilities, valuation allowance, taxes payable, and income tax expense.

b: Explain how deferred tax liabilities and assets are created and the factors that determine how a company’s deferred tax liabilities and assets should be treated for the purposes of financial analysis. 

c: Calculate income tax expense, income taxes payable, deferred tax assets, and deferred tax liabilities, and calculate and interpret the adjustment to the financial statements related to a change in the income tax rate.

d: Calculate the tax base of a company’s assets and liabilities.

e: Evaluate the effect of tax rate changes on a company’s financial statements and ratios. 

f: Identify and contrast temporary versus permanent differences in pre-tax accounting income and taxable income.

g: Explain recognition and measurement of current and deferred tax items.

h: Describe the valuation allowance for deferred tax assets—when it is required and what effect it has on financial statements.

i: Analyze disclosures relating to deferred tax items and the effective tax rate reconciliation and explain how information included in these disclosures affects a company’s financial statements and financial ratios.

j: Identify the key provisions of and differences between income tax accounting under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP).

a: Determine the initial recognition, initial measurement and subsequent measurement of bonds.

b: Describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments. 

c: Explain the derecognition of debt.

d: Describe the role of debt covenants in protecting creditors.

e: Describe the financial statement presentation of and disclosures relating to debt.

f: Explain motivations for leasing assets instead of purchasing them. 

g: Explain the financial reporting of leases from a lessee’s perspective.

h: Explain the financial reporting of leases from a lessor’s perspective. 

i: Compare the presentation and disclosure of defined contribution and defined benefit pension plans.

j: Calculate and interpret leverage and coverage ratios.

a: Compare and contrast financial reporting quality with the quality of reported results (including quality of earnings, cash flow, and balance sheet items). 

b: Describe a spectrum for assessing financial reporting quality.

c: Explain the difference between conservative and aggressive accounting.

d: Describe motivations that might cause management to issue financial reports that are not high quality.

e: Describe conditions that are conducive to issuing low-quality, or even fraudulent, financial reports.

f: Describe mechanisms that discipline financial reporting quality and the potential limitations of those mechanisms. 

g: Describe presentation choices, including non-GAAP measures, that could be used to influence an analyst’s opinion.

h: Describe accounting methods (choices and estimates) that could be used to manage earnings, cash flow, and balance sheet items.

i: Describe accounting warning signs and methods for detecting manipulation of information in financial reports.

a: Evaluate a company’s past financial performance and explain how a company’s strategy is reflected in past financial performance.

b: Demonstrate how to forecast a company’s future net income and cash flow.

c: Describe the role of financial statement analysis in assessing the credit quality of a potential debt investment. 

d: Describe the use of financial statement analysis in screening for potential equity investments.

e: Explain appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company.

a: Compare business structures and describe key features of corporate issuers.
b: Compare public and private companies.
c: Compare the financial claims and motivations of lenders and owners.

a: Describe a company’s stakeholder groups, and compare their interests.

b: Describe the principal-agent relationship and conflicts that may arise between stakeholder groups.

c: Describe corporate governance and mechanisms to manage stakeholder relationships and mitigate associated risks.
d: Describe both the potential risks of poor corporate governance and stakeholder management and the benefits from effective corporate governance and stakeholder management.

e: Describe environmental and social, and governance considerations in investment analysis.

f: Describe environmental, social, and governance investment approaches.

a: Describe key features and types of business models.
b: Describe expected relations between a company’s external environment, business model, and financing needs.
c: Explain and classify types of business and financial risks for a company.

a: Describe types of capital investments made by companies.
b: Describe the capital allocation process and basic principles of capital allocation.
c: Demonstrate the use of net present value (NPV) and internal rate of return (IRR) in allocating capital and describe the advantages and disadvantages of each method.
d: Describe common capital allocation pitfalls.
e: Describe expected relations among a company’s investments, company value, and share price.
f: Describe types of real options relevant to capital investment.

a: Compare methods to finance working capital
b: Explain expected relations between working capital, liquidity, and short-term funding needs.
c: Describe sources of primary and secondary liquidity and factors affecting a company’s liquidity position.
d: Compare a company’s liquidity position with that of peers.
e: Evaluate short-term funding choices available to a company.

a: Calculate and interpret the weighted average cost of capital (WACC) of a company.

b: Describe how taxes affect the cost of capital from different capital sources. 

c: Calculate and interpret the cost of debt capital using the yield-to-maturity approach and the debt-rating approach.

d: Calculate and interpret the cost of noncallable, nonconvertible preferred stock. 

e: Calculate and interpret the cost of equity capital using the capital asset pricing model approach and the bond yield plus risk premium approach.

f: Explain and demonstrate beta estimation for public companies, thinly traded public companies, and nonpublic companies.

g: Explain and demonstrate the correct treatment of flotation costs.

a: Explain factors affecting capital structure.

b: Describe how a company’s capital structure may change over time.

c: Explain the Modigliani–Miller propositions regarding capital structure.

d: Describe the use of target capital structure in estimating WACC, and calculate and interpret target capital structure weights.

e: Describe competing stakeholder interests in capital structure decisions.

a: Define and explain leverage, business risk, sales risk, operating risk, and financial risk and classify a risk. 

b: Calculate and interpret the degree of operating leverage, the degree of financial leverage, and the degree of total leverage. 

c: Analyze the effect of financial leverage on a company’s net income and return on equity.

d: Calculate the breakeven quantity of sales and determine the company’s net income at various sales levels.

e: Calculate and interpret the operating breakeven quantity of sales.

a: Explain the main functions of the financial system.

b: Describe classifications of assets and markets.

c: Describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes.

d: Describe types of financial intermediaries and services that they provide. 

e: Compare positions an investor can take in an asset.

f: Calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call.

g: Compare execution, validity, and clearing instructions.

h: Compare market orders with limit orders.

i: Define primary and secondary markets and explain how secondary markets support primary markets.

j: Describe how securities, contracts, and currencies are traded in quote-driven, order-driven, and brokered markets. 

k: Describe characteristics of a well-functioning financial system.

l: Describe objectives of market regulation.

a: Describe a security market index.

b: Calculate and interpret the value, price return, and total return of an index.

c: Describe the choices and issues in index construction and management.

d: Compare the different weighting methods used in index construction.

e: Calculate and analyze the value and return of an index given its weighting method.

f: Describe rebalancing and reconstitution of an index.

g: Describe uses of security market indexes.

h: Describe types of equity indexes.

i: Compare types of security market indexes.

j: Describe types of fixed-income indexes. 

k: Describe indexes representing alternative investments.

a: Describe market efficiency and related concepts, including their importance to investment practitioners. 

b: Contrast market value and intrinsic value.

c: Explain factors that affect a market’s efficiency.

d: Contrast weak-form, semi-strong-form, and strong-form market efficiency.

e: Explain the implications of each form of market efficiency for fundamental analysis, technical analysis, and the choice between active and passive portfolio management.

f: Describe market anomalies.

g: Describe behavioral finance and its potential relevance to understanding market anomalies.

a: Describe characteristics of types of equity securities.

b: Describe differences in voting rights and other ownership characteristics among different equity classes. 

c: Compare and contrast public and private equity securities.

d: Describe methods for investing in non-domestic equity securities.

e: Compare the risk and return characteristics of different types of equity securities.

f: Explain the role of equity securities in the financing of a company’s assets.

g: Contrast the market value and book value of equity securities.

h: Compare a company’s cost of equity, its (accounting) return on equity, and investors’ required rates of return.

a: Explain uses of industry analysis and the relation of industry analysis to company analysis.

b: Compare methods by which companies can be grouped.

c: Explain the factors that affect the sensitivity of a company to the  business cycle and the uses and limitations of industry and company descriptors such as “growth,” “defensive,” and “cyclical.”

d: Describe current industry classification systems, and identify how a company should be classified , given a description of its activities and the classification system.

e: Explain how a company’s industry classification can be used to identify a potential “peer group” for equity valuation. 

f: Describe the elements that need to be covered in a thorough industry analysis.

g: Describe the principles of strategic analysis of an industry.

h: Explain the effects of barriers to entry, industry concentration, industry capacity, and market share stability on pricing power and price competition. 

i: Describe industry life-cycle models, classify an industry as to life-cycle stage, and describe limitations of the life-cycle concept in forecasting industry performance.

j: Describe macroeconomic, technological, demographic, governmental, social, and environmental influences on industry growth, profitability, and risk. 

k: Compare characteristics of representative industries from the various economic sectors.

l: Describe the elements that should be covered in a thorough company analysis.

a: Evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market.

b: Describe major categories of equity valuation models.

c: Describe regular cash dividends, extra dividends, stock dividends, stock splits, reverse stock splits, and share repurchases.

d: Describe dividend payment chronology. 

e: Explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models.

f: Explain advantages and disadvantages of each category of valuation model.

g: Calculate the intrinsic value of a non-callable, non-convertible preferred stock.

h: Calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate.

i: Identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate.

j: Explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables.

k: Calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value.

l: Describe enterprise value multiples and their use in estimating equity value.

m: Describe asset-based valuation models and their use in estimating equity value.

a: Describe basic features of a fixed-income security.

b: Describe content of a bond indenture.

c: Compare affirmative and negative covenants and identify examples of each.

d: Describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities.

e: Describe how cash flows of fixed-income securities are structured.

f: Describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and whether such provisions benefit the borrower or the lender.

a: Describe classifications of global fixed-income markets.

b: Describe the use of interbank offered rates as reference rates in floating-rate debt.

c: Describe mechanisms available for issuing bonds in primary markets.

d: Describe secondary markets for bonds.

e: Describe securities issued by sovereign governments.

f: Describe securities issued by non-sovereign governments, quasi-government entities, and supranational agencies. 

g: Describe types of debt issued by corporations.

h: Describe structured financial instruments. 

i: Describe short-term funding alternatives available to banks.

j: Describe repurchase agreements (repos) and the risks associated with them.

a: Calculate a bond’s price given a market discount rate.

b: Identify the relationships among a bond’s price, coupon rate, maturity and market discount rate (yield-to-maturity).

c: Define spot rates and calculate the price of a bond using spot rates.

d: Describe and calculate the flat price, accrued interest, and the full price of a bond.

e: Describe matrix pricing.

f: Calculate annual yield on a bond for varying compounding periods in a year.

g: Calculate and interpret yield measures for fixed-rate bonds and floating-rate notes. 

h: Calculate and interpret yield measures for money market instruments.

i: Define and compare the spot curve, yield curve on coupon bonds, par curve, and forward curve.

j: Define forward rates and calculate spot rates from forward rates, forward rates from spot rates, and the price of a bond using forward rates.

k: Compare, calculate, and interpret yield spread measures.

a: Explain benefits of securitization for economies and financial markets. 

b: Describe securitization, including the parties involved in the process and the roles they play.

c: Describe typical structures of securitizations, including credit tranching and time tranching.

d: Describe types and characteristics of residential mortgage loans that are typically securitized.

e: Describe types and characteristics of residential mortgage-backed securities, including mortgage pass-through securities and collateralized mortgage obligations, and explain the cash flows and risks for each type. 

f: Define prepayment risk and describe the prepayment risk of mortgage-backed securities.

g: Describe characteristics and risks of commercial mortgage-backed securities.

h: Describe types and characteristics of non-mortgage asset-backed securities, including the cash flows and risks of each type. 

i: Describe collateralized debt obligations, including their cash flows and risks.

j: Describe characteristics and risks of covered bonds and how they differ from other asset-backed securities.

a: Calculate and interpret the sources of return from investing in a fixed-rate bond.

b: Define, calculate, and interpret Macaulay, modified, and effective durations.

c: Explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options.

d: Define key rate duration and describe the use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve.

e: Explain how a bond’s maturity, coupon, and yield level affect its interest rate risk.

f: Calculate the duration of a portfolio and explain the limitations of portfolio duration.

g: Calculate and interpret the money duration of a bond and price value of a basis point (PVBP).

h: Calculate and interpret approximate convexity and compare approximate and effective convexity.

i: Calculate the percentage price change of a bond for a specified change in yield, given the bond’s approximate duration and convexity.

j: Describe how the term structure of yield volatility affects the interest rate risk of a bond.

k: Describe the relationships among a bond’s holding period return, its duration, and the investment horizon.

l: Explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes.

m: Describe the difference between empirical duration and analytical duration.

a: Describe credit risk and credit-related risks affecting corporate bonds.

b: Describe default probability and loss severity as components of credit risk.

c: Describe seniority rankings of corporate debt and explain the potential violation of the priority of claims in a bankruptcy proceeding.

d: Compare and contrast corporate issuer credit ratings and issue credit ratings and describe the rating agency practice of “notching.”

e: Explain risks in relying on ratings from credit rating agencies. 

f: Explain the four Cs (Capacity, Collateral, Covenants, and Character) of traditional credit analysis.

g: Calculate and interpret financial ratios used in credit analysis.

h: Evaluate the credit quality of a corporate bond issuer and a bond of that issuer, given key financial ratios of the issuer and the industry. 

i: Describe macroeconomic, market, and issuer-specific factors that influence the level and volatility of yield spreads. 

j: Explain special considerations when evaluating the credit of high-yield, sovereign, and non-sovereign government debt issuers and issues.

a: Define a derivative and describe basic features of a derivative instrument.
b: Describe the basic features of derivative markets, and contrast over-the-counter and exchange-traded derivative markets.
c: Define forward contracts, futures contracts, swaps, options (calls and puts), and credit derivatives and compare their basic characteristics.

d: Determine the value at expiration and profit from a long or a short position in a call or put option.

e: Contrast forward commitments with contingent claims.

f: Describe benefits and risks of derivative instruments.

g: Compare the use of derivatives among issuers and investors.

h: Explain how the concepts of arbitrage and replication are used in pricing derivatives.

i: Explain the difference between the spot and expected future price of an underlying and the cost of carry associated with holding the underlying asset.
j: Explain how the value and price of a forward contract are determined at initiation, during the life of the contract, and at expiration.
k: Explain how forward rates are determined for an underlying with a term structure and describe their uses. 

l: Compare the value and price of forward and futures contracts.

m: Explain why forward and futures prices differ.
n: Describe how swap contracts are similar to but different from a series of forward contracts.
o: Contrast the value and price of swaps.
p: Explain the exercise value, moneyness, and time value of an option.
q: Contrast the use of arbitrage and replication concepts in pricing forward commitments and contingent claims.
r: Identify the factors that determine the value of an option and describe how each factor affects the value of an option.
s: Explain put–call parity for European options
t: Explain put–call forward parity for European option.
u: Explain how to value a derivative using a one-period binomial model.
v: Describe the concept of risk neutrality in derivatives pricing.

a: Describe types and categories of alternative investments.

b: Describe characteristics of direct investment, co-investment, and fund investment methods for alternative investments.

c: Describe investment and compensation structures commonly used in alternative investments.

d: Describe issues in performance appraisal of alternative investments.

e: Calculate and interpret returns of alternative investments both before and after fees.
f: Explain investment characteristics of private equity.
g: Explain investment characteristics of private debt.

h: Explain investment characteristics of real estate.

i: Explain investment characteristics of infrastructure.

j: Explain investment characteristics of natural resources.

k: Explain investment characteristics of hedge funds.

a: Describe the portfolio approach to investing.

b: Describe the steps in the portfolio management process.

c: Describe types of investors and distinctive characteristics and needs of each.

d: Describe defined contribution and defined benefit pension plans.

e: Describe aspects of the asset management industry.

f: Describe mutual funds and compare them with other pooled investment products.

a: Calculate and interpret major return measures and describe their appropriate uses.

b: Compare the money-weighted and time-weighted rates of return and evaluate the performance of portfolios based on these measures.

c: Describe characteristics of the major asset classes that investors consider in forming portfolios.

d: Explain risk aversion and its implications for portfolio selection. 

e: Explain the selection of an optimal portfolio, given an investor’s utility (or risk aversion) and the capital allocation line.

f: Calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data.

g: Calculate and interpret portfolio standard deviation.

h: Describe the effect on a portfolio’s risk of investing in assets that are less than perfectly correlated.

i: Describe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio.

a: Describe the implications of combining a risk-free asset with a portfolio of risky assets.

b: Explain the capital allocation line (CAL) and the capital market line (CML).

c: Explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk.

d: Explain return generating models (including the market model) and their uses.

e: Calculate and interpret beta.

f: Explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML).

g: Calculate and interpret the expected return of an asset using the CAPM.

h: Describe and demonstrate applications of the CAPM and the SML.

i: Calculate and interpret the Sharpe ratio, Treynor ratio, M2, and Jensen’s alpha.

a: Describe the reasons for a written investment policy statement (IPS).

b: Describe the major components of an IPS.

c: Describe risk and return objectives and how they may be developed for a client.

d: Explain the difference between the willingness and the ability (capacity) to take risk in analyzing an investor’s financial risk tolerance.

e: Describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets.

f: Explain the specification of asset classes in relation to asset allocation.

g: Describe the principles of portfolio construction and the role of asset allocation in relation to the IPS.

h: Describe how environmental, social, and governance (ESG) considerations may be integrated into portfolio planning and construction.

a: Compare and contrast cognitive errors and emotional biases. 

b: Discuss commonly recognized behavioral biases and their implications for financial decision making. 

c: Describe how behavioral biases of investors can lead to market characteristics that may not be explained by traditional finance.

a: Define risk management.

b: Describe features of a risk management framework.

c: Define risk governance and describe elements of effective risk governance.

d: Explain how risk tolerance affects risk management.

e: Describe risk budgeting and its role in risk governance.

f: Identify financial and non-financial sources of risk and describe how they may interact. 

g: Describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods.

a: Explain principles and assumptions of technical analysis.

b: Describe potential links between technical analysis and behavioral finance.

c: Compare principles of technical analysis and fundamental analysis.

d: Describe and interpret different types of technical analysis charts.

e: Explain uses of trend, support, and resistance lines.

f: Explain common chart patterns.

g: Explain common technical indicators.

h: Describe principles of intermarket analysis.

i: Explain technical analysis applications to portfolio management.

a: Describe “Fintech.”

b: Describe Big Data, artificial intelligence, and machine learning.

c: Describe fintech applications to investment management.

d: Describe financial applications of distributed ledger technology.

a: Explain ethics.

b: Describe the role of a code of ethics in defining a profession.

c: Describe professions and how they establish trust.

d: Describe the need for high ethical standards in investment management.

e: Explain professionalism in investment management.

f: Identify challenges to ethical behavior.

g: Compare and contrast ethical standards with legal standards.

h: Describe and apply a framework for ethical decision making.

a: Describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards.

b: Identify the six components of the Code of Ethics and the seven Standards of Professional Conduct.

c: Explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard.

a: Demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity.

b: Recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.

c: Identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards.

a: Explain why the GIPS standards were created, who can claim compliance, and who benefits from compliance.

b: Describe the key concepts of the GIPS standards for firms.

c: Explain the purpose of composites in performance reporting.

d: Describe the fundamentals of compliance, including the recommendations of the GIPS standards with respect to the definition of the firm and the firm’s definition of discretion.

e: Describe the concept of independent verification.

a: Evaluate practices, policies, and conduct relative to the CFA Institute Code of Ethics and Standards of Professional Conduct.

b: Explain how the practices, policies, and conduct do or do not violate the CFA Institute Code of Ethics and Standards of Professional Conduct.