CFA 2016 Mind Maps Level 1 PDF

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Summary

This is the mindmap of CFA level 1 in 2016. ...

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Al l CFA I nst it ut e m em ber s and candidates ar e r equir ed t o com ply wi th t he Code and St andar ds Basic st r uct ur e for en f or cing t he Code and St an dards

The Boa Professional Conduct pr ogram ( PCP)

St r uctu re of t h e CFA I n st it ut e Professional Conduct Progr am

The Offi

An in q u iry can be p r om pt ed by sev er al circum stances

a.

The Pr o Con duc an in v e may inc

1 . Code Of Et hics And St a nda rd s Of Pr ofe ssion a l Condu ct Pr ocess for t he enf or cem en t of th e Code and Standards

When an inq uiry is init iated

Up on r e m at er ia t he inve Designa

Act w it h in t egrit y, com p et en respect and in an et hical m

I n t egrit y of in vest m ent pr ofe interest of clients abov e p er so

Si x co m pon ent s of t he Code of Eth ics

Car e & j udg ment

Pr actice ethics & encour age oth I nt egr it y & v iabilit y of t he glob Pr ofessional com pet ence

b, c.

Pr ofessionalism I nt egr ity of Capital m ar ket s Dut ies of Client s

Seven St andar ds of Pr of ession al Condu ct

Dut ies to Emp loy ers I n v est ment analy sis, Recomm Con flict of interest Resp on sib ilit ies as a CFA I n m em ber or CFA Candidat e

1. Code Of Ethics And Standards Of Professional Conduct - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

Un app Cod

Gu ida nce Par wit

A. Know le dge of t he law

Re com m end ed p r oc edu res f or co m p lia nce ( R

Ap p lica tio n

Fundam ent als and Com pliance Consist ency of input dat a is crit ical t o ef fect ive com pliance wit h GI PS and establish a foundation for full, fair and com parable perfor mance present at ions

Not e: GI PS sta nd ent iret y in t he re ca ndida te is re qu m at er ial t hrou g h "Fu ndam ent al of

I np ut d at a Uniform it y in m et hods used t o calculate returns to achieve com parability am ong fir m s

Calculat ion m et hodology com posit e ret urn is t he a sse t - w eig h t e d average of all t he port folios' perform ance result s

Composit e const ruct ion allow firms t o elaborat e on t he raw numbers and give t he end user t he proper cont ext t o unders t and No "n egat ive assu ran ce" is needed for non- applicable di sclosures

Disclosures

Present at ion and r eport ing

M a j or se ct ion s of GI PS st a n da rds

Real est at e Refer s t o invest m en t s in non- public com panies that are in various stages of developm ent and vent ur e invest ing, buyou t in vest in g and m ezzanie financin g

Privat e equit y Wrap fees are a type of bundle fee and are speci fic to a part icular invest ment product is charged by a w rap fee sponsor for i nvestm ent management ser vices and included t rading expen ses t hat can not be separat ely ident if ied can be all- inclusi ve, asset- based fees and m ay include a com bination of invest ment m an agem ent fees, t r ading expenses, cust ody fees an d/ or adm inist ration f ees

Wrap Fee/ Separ at ely Managed Account ( SMA) port folios.

A w rap fee port folio is som et im es referr ed t o as a "separat ely managed account (SMA) or "m anaged account "

Comply wit h local law or regulat ion conf lict s wit h GI PS Mak e full disclosure of the conflict N ot e : t h is dif fe r s fr om St an d a r ds of Pr ofe ssion a l Cond u ct in w hich t h e st r ict e r of loca l la w s or St a nda r ds of Pr ofe ssi ona l Conduct pr e v a ils

I f local/ coun tr y specific law or r eg ulat ion conflicts w it h GI PS

H ow a r e GI PS st a n d a rd s im pl e m e n t e d in co u n t rie s w i t h e x ist ing st a n d a rd s for pe rf or m an ce r epor t in g

Firm s fr om any count r y m ay com e int o com pliance wit h GI PS GI PS m ust be applied on t he fir m - w i de basis. Firm must be defined as an inves t ment firm, subsidiary, or division held out to clients as a dist inct bu si ne ss e n t it y Tot al firm assets must be the aggregate of the m ar ke t va lu e of all discret ionary and non - discret ionary assets un der m anagement . This includes bot h fee- paying an d non- fee- paying asset s Firm s must initially show GI PS com pliant history for a since ince pt ion if t he firm has been in exist ence f or

m inim um of 5 y e a rs, le ss t ha n 5 y e a r s.

I nv est m ent fir m defin it ion

or

Aft er 5- year com pliant h ist ory has been achieved, firm s m ust add an addit ional year of perf orm ance each year unt il 10- year per form ance r ecord is est ablished, at a m inimum only GI PS compliant perform ance is present ed for periods aft er 1 Jan . 20 00 ; and Firm discloses non-com pliance per iod and explain how it is not in compliance wit h GI PS

A firm m ay link n on- GI PS com pliant perform ance t o it s com pliant hist ory as long as

Fir ms previously claiming com pliance w it h an I nvest m en t Perfor m ance Coun cil- end or sed Cou nt r y Version of GI PS are grant ed r ecipr ocit y t o claim com pliance w ith GI PS for historical periods prior to 1 Jan. 2006

Th e scope of t he GI PS

Histor ical p er for m ance r ecor d

3+4 GIPS - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

To be con t in u e d… F o r M O R E CF A ® M i n d M a p s

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t o solv e m any t ypes of t im e valu e of m on ey problem s Find PMT Fin d N Find I / Y

Loan paym ent and Am ort izat ion

Am or t izat ion t able

f1 . Use t im e lin e

Rat e of com pound growt h Nu m ber of periods for specific gr ow th

Ot her applicat ions

Funding a fut ur e obligat ion the sum of t he p resent values of t he cash Rows is the p resent value of t he series. The sum of t he fut ure values (at som e fut ur e t ime = n) of a ser ies of cash flows is t he fut ur e value of t hat ser ies of cash flow s. The cash flow a dd itiv ity principle r efers t o the fact t hat p r esent value of any st ream of cash flows equals the sum of t he pr esent values of t he cash flows

Connect ion bet w een PV, FV & series of CF

Fut ur e v alue Present value a ser ies of equal cash flow s t hat occur s at ev enly sp aced in t er v als over tim e. occur at the en d of each t im e period .

Or dinar y Annuit y

FV of An nuit y Due = FV of Or dinar y An nuit y x ( 1+ I / Y) PV of An nuit y Due = PV of Or dinar y An nuit y x ( 1+ I / Y)

Annuit y occur a t t he b eginnin g of e ach t im e per iod.

Annuity Due

PV of a Perpet uity Discount each individual cash fl ows Use CF function in Calculat or

Uneven CF

e . CF ca lcu la t ion

5. TIME VALUE OF MONEY - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

Con ve rt am on g th ese yields

1. Based on face v alue, not price 2. Use 360- day

Not m uch m eaningful

3. Use sim ple inter est, ignor e r einv estm ent of int er est

Wh er e: r BD = t he annualized yield on a bank discount basis D = t he dollar discoun t , w hich is equal t o the differen ce bet ween the face value of t he bill and the pur chase pr ice F = the face value (par valu e) of t he bill t = num ber of days rem aining until m atur it y 360 = bank conv ent ion of n um ber of days in a year

Ban k discou nt yield

6

A

Yie ld s of T - b ills Wh er e: Po = initial price of the the instrum ent P1 = pr ice received for instr um ent at m at urity D 1 = int er est paym ent (dist ribution)

Hold ing period yield

Effect ive annual yield

r MM = HPY x ( 3 6 0 / t ) Money m arket yield

BEY = 2 x

sem i an nual discount rat e Bond equivalent yield

6. DISCOUNTED CASH FLOW APPLICATIONS - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

Calculat e

Excess kur t osis = sam pl e k ur t osis - 3

l. K

Lept okur t ic: mor e peak ed, f at t er t ails (excess k ur t osis > 0) - - > m ore r isk Plat yk ur t ic: less peak ed ( excess ku r tosis < 0) Mesok ur t ic: ident ical ( excess ku rt osis = 0 )

Compared w it h norm al distr ibut ion

Sym met rical mean= median= mode t he fr equency of experien cing losses and gains are t he same

j ,k. Sh a pe of dist r

Positively sk ewed ( Sk> 0)

Types

Non sy m m e t rical ( Skewness) ( because of out liers)

Negativ el y skewed ( Sk < 0) -- > more r isk

CV ( Coefficien t of Variat ion )

i. Re la t iv e dis Negat ive Sharpe rat io Not suit able w ith asy m m etr ic r et ur n dist r ibution

Limit at ions

Sharpe Rat io / Rew ard- t o- Variabilit y rat io

For any dist r ibut ion wit h finit e vari ance, the per cent age of obser v at ions lie w ithin k st andar d deviat ion of th e m ean is at least 1 - 1/ (k^ 2) 36% : + /- 1.25k 56% : + /- 1.50k

h. Che by sh e v ' s ine

75% : + /- 2k 89% : + /- 3k 94% : + /- 4k Easy t o com pute affect ed by ext rem e v alue

Ran ge = Max - Min

no info on how dat a is distr ibut ed bet t er t han range less sophist icated t han Var and Sd

g. Disp er si ( m e a su r e o

Populat ion

Variance & St and ar d d eviat ion

Sample

Sem iv ar iance an d sem id ev iat ion

7. Statistical Concepts and Market Rerurns - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

To be con t in u e d… F o r M O R E CF A ® M i n d M a p s http://www.e-junkie.com/ecom/gb.php?cl=2

Financi al Elem ent

Addit i ona Any com

FR

Role s of FR & FSA

Fi nanc Rol e of FR

Firm 's Change

Use i nfo i

Roles of FSA

Use other

Rev enu e

I n com e Stat em en t

Expense Gains a A

Ro le o f k e y FS

Balance Sheet ( A= L+ OE)

L O

CFO

CF statement

CFI CFF

St at ement of ch an ges in Own disclo (e.g: a

FS n otes (foot not es)

Addit i

Ope rat ing a ct ivit y : activ it ies t ha

Cla ssif ica t ion

I nvest ing act ivit y: act ivit ies ass Fina ncing a ct ivit y: activities rel

Elem en

FS e lem ent s & a ccount s

Accoun t & fin a ncia l st a t em en t

Accoun

Account ing equ at ion

Ex p a nd ing : A = L + Co

2 3 . Fin a ncia l r e por tin g m e ch a n ics

Cas

Accr u als & V a lua t ion a dj ust m en t

Accr uals Cas

Va lua t ion a dj us

Rela t ion sh ip s am on g I S, BS a nd st at e m e nt of CFs, a nd of ow n er s' e quit y

Account in g sy st e m

BS: show a com pa

Chan ges in BS acc r eflect ed in I S, st a

Flow of inform at ion De bit & Cr edit

Usin g fin . st a t em e n t in se cu r it y a na ly sis

Analy st uses FS t Analy st can use

23. Financial reporting mechanics - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

Ove rv iew FRS

Obj e ct ive of FR: p Im por t ance of r epor

St an da rd- s ( est ab lishin

St a n da rd set t in g & Re gu lat or y bodie s Re gu la t or y ( enfor cin g s

St at us of global conver gence of acc

c. Bar r ier s t o developing one univ ersa

Qu alit a t ive ch a ract er ist ics

T Const ra i nt s

C N

I FRS f r am e w or k

Elem en ts of FS

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Protect u nsophisticat ed inv est ors Est ablish m inim u m st an dar d of com pet ency Help inv est or s evalu at e perf orm ance

Ob j e ctive s of m ar k et r e gula t ion

Pr even t in sider Prom ot e com mom FR requir em ent s Requir e min im um level of capit al Com plet e m arket

( Avai labi lit y)

Oper at ion al effi cien cy I nf orm at ion al ef ficiency

( Low cost)

Cha r acte r ist ics of w e ll- functioning fin . sy ste m

( P reflects fundam ent al info)

Allocat ion al efficiency

( at the best efficiency)

Trades occu r at specif ic t i m es Al l bi ds+ asks are declared, and t hen one negoti ated pri ce i s set for the stock Cal l m ark et

i n sm al l er m ar k ets to set openi ng pri ces and pri ces after tr ading hal ts on m ajor exchanges

used

Dist in guish

Trade occur any ti m e t he m arket i s open aucti on process dealer bid- ask quot e

Pri ce i s set by

Cla ssifica tion of m a r k e t s

Conti nuou s m ar k et

45

Quote- dr i v en m ar k ets ( trade wi th deal ers) 1 . Price 2 . Display pr eced en ce

M a tchi n g ru le s

Order- dri ven m arkets

3 . Tim e pr eced en ce

Dist in guish

Br ok er ed m ar k ets I PO v s. Secondary i ssues Pu bl i c offeri ngs vs. Pr ivate pl acem ents

Pr im ary m ark et

Secu r i ti es tr ade aft er i ni t i al offer i ngs I m por t ance: pr ov i de Liqu i di ty + Pr i ce i nfo

Pr im ar y v s. Se conda r y m a rk e ts

Secon dary m arket

M.O: ex ecu te at t he best P L.O

Market vs. Lim it order

Good- ti l - cancell ed I m m ediate- or - cancel

Or de r

Good- on- cl ose Good- on- open Stop -sel l St op- buy

St op order

Validit y

45. Market Organization & Structure - CFA Mind Maps Level 1 - 2016 - Copyright by WAY TO FINANCE SUCCESS

Se cu rit y m a r k e t inde x

used t o pr esent t he per form class, secur it y m ar ket or seg

Pr ice index: calcu la

Calcu la te an ind ex

Re t u rn index: inclu

Which t a rget m a

Which securit ies

I nde x const r u ct ion & m an agem ent

How weight?

Re-balancing fr e Re-exam ining w

Pr ice - w e igh t e d i

Eq ua l- w e ig h

W e ight ing m e t hod s

.

M a r k e t - ca p w

4 6 . Se curit y M ar ke t I n dice s

Fu n dam e n ta l w e ( earnings, dividend

Reb ala ncin g & Re const it u t ion

Re b a la n ce : adj u st t he Re con st it ut ion : add Reflect m ark et sen

Uses of secu rit ies m ar ket in dice s

Pr ox y for m easuri

Pr ox y of bet a & ris

Bench m ark of m an Model port folio for Br oad m ark et

Mu lt i- m arket v

Ty p es of e qu it y in dices

Sector index Style index

Ty p es of Fix ed I n com e in dices

Large

Deale...