Monday, December 5, 2011

Strategy for CFA Level 2 June 2013

CFA Level 2 strategy June 2013

My Targets:
Quant 22
Port 23
Fi/Der 24 25
Copr 26
Ai 27
Eq 28
FSA 29
Ethics 30

200 questions each day.

Last month strategy. single minded focus needed.

In this article I will outline some strategy for the CFA level 2 exam. To start with, I personally would advice to go through Economics and FSA again as they are some of the areas which are very interesting and very broad, also they will take a lot of time to settle in your mind.
  • Economics is the most interesting topic today for the entire world in the light of currency and debt collapses so I think it will be the easiest to start with slowly. And the other one which is FSA is the largest and most interesting subject that helps you to understand the pillars of finance.
  • I checked Scz of Fixed income and derivatives, now if the things are done in momentum the under lying logics can be imbibed the mind. The glimpse that I had in Fixed income and Derivatives made me feel that they will not give me trouble
  • Portfolio is nearly the same as I studied and things looked fair.

I will be writing about some of the intuitive ways to understand and apply and see in the real world some concepts of economics, part of which I will write in my research post.

Resources that are very good:
Scz & All for CFA L2 esp videos
Sas materials are provided by coaching

Monthly Strategy as planned on Dec5th:
Dec 2011: Eco and FSA (CFA)
Dec 2011: Foundation of Risk Management (20% of FRM and a total theory topic with no Quant)
Thinking of SAS certificates
Dec 2011: SAS software, MATLAB Finance toolbox, and other modeling tools like Excel finance
Jan 2011: CFA and Modeling

Carry over to Jan: Eco+FSA (CFA-L2) & Foundation of Risk Management

Monthly strategy for the exam:
Jan 2011: Registrations

Feb: Financial statements analysis + Corporate Finance (Economics, Equity touching)
March: Portfolio Management + Fixed income
April: Derivative + Quantitative
May (Practice the tests)
June (Exam on 3rd June 2012)

Financial Statement analysis of CFA level 2 consists of broadly these areas:
  1. Inter-corporate investment
  2. Pensions
  3. Merger and Acquisitions
  4. Multinational Operations
  5. Analysis in details of Cash flows
This is something very interesting and will require some time to get in.
When I looked into the Analysis of operating cash flows, the topics and areas covered and taken are very very fascinating and will help in understanding the games that are played with Cash flows. I will be taking this subject as the first to start with in the L2 study.

Economics for CFA Level 2:
This is a very short area, and has topics related to global/international economics. There are small small topics picked up and made up into a chapter. And these topics are taken from various sources, which are cited clearly. The most interesting area is International asset pricing. Overall it is not as interesting as Level 1, no marginal graphs, no complexities, and not so much depth. But this is an opinion after going through it once.
Interest rate parity
Currency conversion
International CAPM

Synchronizing my effort from Level 1 to Level 2(for Dec 2nd week):
  1. Portfolio is one are directly taken as it is form 1 to 2, and it is also bit imp for FRM
  2. Derivative is same as FRM Level 1 and CFA Level 1
  3. Equity is again taken directly from 1 to 2 so it highly related
  4. Eco seems to be very different, and of-course quant is not a problem (less linked up)
  5. Fixed income remains normal,
  6. Ethics is again as it is from there to here
  7. Corporate is same
Rank from toughest to easiest for me:
  1. Economics
  2. Financial Reporting
  3. Corporate
  4. Rest are same, Derivatives Fixed income covered in both
  5. Easiest being Equity
Independent areas:
  • International asset pricing (Eco)
  • CDO (quite independent)
I am trying to make some presentation on these areas. Strategy to make Videos of CFA Level 2, priority list:
  1. Portfolio Management
  2. Derivative
  3. Equity
Forex is covered in Economics, and will start this to know bit about currency.

Areas covered in Excel Financial modeling pertinent to CFA level 2:
FCFF (Equity)
FI Bond Portfolio and Z spreads (best understood when talked on excel)
Corporate Wacc question of optimizations
Waiting for Derivatives in Excel, macros in excel, VBA to cover some part of level 2
Most of the features of excel are covered in this regard

Jan end: The Modeling done on Excel for all Equity valuations are taken from CFA level 2, hence this is one thing that gets linked, and some of the M&A and Investment banking areas comes from Corporate which makes this area interesting.

Whereas if I think of difficulty then FSA becomes most tricky, hence keeping an eye on it is a better idea.

Pages linked to time to read:
On an average these books vary from 300-600 pages, thus 300 pages books requires 300*5 minutes and so on. You can break it down to like 50 pages to be done in one sitting of 2 hours, and note making.

FRM will cover a lot of derivatives and fixed income so the only thing left will be FRA. I can do quant side by side using financial time series and regression books so those things will not be a problem.

Conclusion: Strategy for the 2 exams are discussed, my personal views on strategy is described.

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