2024 CFA© Program Curriculum Level I Volume 1 Quantitative Methods, Economics

✍ Scribed by CFA Institute

• Publisher: CFA Institute
• Year: 2024
• Tongue: English
• Leaves: 624
• Category: Library

✦ Table of Contents

How to Use the CFA Program Curriculum
Errata
Designing Your Personal Study Program
CFA Institute Learning Ecosystem (LES)
Feedback
Quantitative Methods
Learning Module 1 Rates and Returns
Introduction
Interest Rates and Time Value of Money
Determinants of Interest Rates
Rates of Return
Holding Period Return
Arithmetic or Mean Return
Geometric Mean Return
The Harmonic Mean
Money-Weighted and Time-Weighted Return
Calculating the Money Weighted Return
Annualized Return
Non-annual Compounding
Annualizing Returns
Continuously Compounded Returns
Other Major Return Measures and Their Applications
Gross and Net Return
Pre-Tax and After-Tax Nominal Return
Real Returns
Leveraged Return
Practice Problems
Solutions
Learning Module 2 The Time Value of Money in Finance
Introduction
Time Value of Money in Fixed Income and Equity
Fixed-Income Instruments and the Time Value of Money
Equity Instruments and the Time Value of Money
Implied Return and Growth
Implied Return for Fixed-Income Instruments
Equity Instruments, Implied Return, and Implied Growth
Cash Flow Additivity
Implied Forward Rates Using Cash Flow Additivity
Forward Exchange Rates Using No Arbitrage
Option Pricing Using Cash Flow Additivity
Practice Problems
Solutions
Learning Module 3 Statistical Measures of Asset Returns
Introduction
Measures of Central Tendency and Location
Measures of Central Tendency
Dealing with Outliers
Measures of Location
Measures of Dispersion
The Range
Mean Absolute Deviations
Sample Variance and Sample Standard Deviation
Downside Deviation and Coefficient of Variation
Measures of Shape of a Distribution
Correlation between Two Variables
Scatter Plot
Covariance and Correlation
Properties of Correlation
Limitations of Correlation Analysis
Practice Problems
Solutions
Learning Module 4 Probability Trees and Conditional Expectations in Investment Applications
Introduction
Expected Value and Variance
Probability Trees and Conditional Expectations
Total Probability Rule for Expected Value
Bayes' Formula and Updating Probability Estimates
Bayes’ Formula
Practice Problems
Solutions
Learning Module 5 Portfolio Mathematics
Introduction
Portfolio Expected Return and Variance of Return
Covariance
Correlation
Forecasting Correlation of Returns: Covariance Given a Joint Probability Function
Portfolio Risk Measures: Applications of the Normal Distribution
Practice Problems
Solutions
Learning Module 6 Simulation Methods
Introduction
Lognormal Distribution and Continuous Compounding
The Lognormal Distribution
Continuously Compounded Rates of Return
Monte Carlo Simulation
Bootstrapping
Practice Problems
Solutions
Learning Module 7 Estimation and Inference
Introduction
Sampling Methods
Simple Random Sampling
Stratified Random Sampling
Cluster Sampling
Non-Probability Sampling
Sampling from Different Distributions
Central Limit Theorem and Inference
The Central Limit Theorem
Standard Error of the Sample Mean
Bootstrapping and Empirical Sampling Distributions
Practice Problems
Solutions
Learning Module 8 Hypothesis Testing for Finance
Introduction
Hypothesis Tests for Finance
The Process of Hypothesis Testing
Tests of Return and Risk in Finance
Test Concerning Differences between Means with Dependent Samples
Test Concerning the Equality of Two Variances
Parametric versus Nonparametric Tests
Uses of Nonparametric Tests
Nonparametric Inference: Summary
Practice Problems
Solutions
Learning Module 9 Parametric and Non-Parametric Tests of Independence
Introduction
Tests Concerning Correlation
Parametric Test of a Correlation
Non-Parametric Test of Correlation: The Spearman Rank Correlation Coefficient
Tests of Independence Using Contingency Table Data
Practice Problems
Solutions
Learning Module 10 Simple Linear Regression
Introduction
Estimation of the Simple Linear Regression Model
Introduction to Linear Regression
Estimating the Parameters of a Simple Linear Regression
Assumptions of the Simple Linear Regression Model
Assumption 1: Linearity
Assumption 2: Homoskedasticity
Assumption 3: Independence
Assumption 4: Normality
Hypothesis Tests in the Simple Linear Regression Model
Analysis of Variance
Measures of Goodness of Fit
Hypothesis Testing of Individual Regression Coefficients
Prediction in the Simple Linear Regression Model
ANOVA and Standard Error of Estimate in Simple Linear Regression
Prediction Using Simple Linear Regression and Prediction Intervals
Functional Forms for Simple Linear Regression
The Log-Lin Model
The Lin-Log Model
The Log-Log Model
Selecting the Correct Functional Form
Practice Problems
Solutions
Learning Module 11 Introduction to Big Data Techniques
Introduction
How Is Fintech used in Quantitative Investment Analysis?
Big Data
Advanced Analytical Tools: Artificial Intelligence and Machine Learning
Tackling Big Data with Data Science
Data Processing Methods
Data Visualization
Text Analytics and Natural Language Processing
Practice Problems
Solutions
Learning Module 12 Appendices
Appendices
Economics
Learning Module 1 Firms and Market Structures
Introduction
Profit Maximization: Production Breakeven, Shutdown and Economies of Scale
Profit-Maximization, Breakeven, and Shutdown Points of Production
Breakeven Analysis and Shutdown Decision
The Shutdown Decision
Economies and Diseconomies of Scale with Short-Run and Long-Run Cost Analysis
Introduction to Market Structures
Analysis of Market Structures
Monopolistic Competition
Demand Analysis in Monopolistically Competitive Markets
Supply Analysis in Monopolistically Competitive Markets
Optimal Price and Output in Monopolistically Competitive Markets
Long-Run Equilibrium in Monopolistic Competition
Oligopoly
Oligopoly and Pricing Strategies
Demand Analysis and Pricing Strategies in Oligopoly Markets
The Cournot Assumption
The Nash Equilibrium
Oligopoly Markets: Optimal Price, Output, and Long-Run Equilibrium
Determining Market Structure
Econometric Approaches
Simpler Measures
Practice Problems
Solutions
Learning Module 2 Business Cycles
Introduction
Overview of the Business Cycle
Phases of the Business Cycle
Leads and Lags in Business and Consumer Decision Making
Market Conditions and Investor Behavior
Credit Cycles
Applications of Credit Cycles
Consequences for Policy
Economic Indicators over the Business Cycle
The Workforce and Company Costs
Fluctuations in Capital Spending
Fluctuations in Inventory Levels
Economic Indicators
Types of Indicators
Composite Indicators
Leading Indicators
Using Economic Indicators
Other Composite Leading Indicators
Surveys
The Use of Big Data in Economic Indicators
Nowcasting
GDPNow
Practice Problems
Solutions
Learning Module 3 Fiscal Policy
Introduction
Introduction to Monetary and Fiscal Policy
Roles and Objectives of Fiscal Policy
Roles and Objectives of Fiscal Policy
Deficits and the National Debt
Fiscal Policy Tools
The Advantages and Disadvantages of Different Fiscal Policy Tools
Modeling the Impact of Taxes and Government Spending: The Fiscal Multiplier
The Balanced Budget Multiplier
Fiscal Policy Implementation
Deficits and the Fiscal Stance
Difficulties in Executing Fiscal Policy
Practice Problems
Solutions
Learning Module 4 Monetary Policy
Introduction
Role of Central Banks
Roles of Central Banks and Objectives of Monetary Policy
The Objectives of Monetary Policy
Monetary Policy Tools and Monetary Transmission
Open Market Operations
The Central Bank’s Policy Rate
Reserve Requirements
The Transmission Mechanism
Monetary Policy Objectives
Inflation Targeting
Central Bank Independence
Credibility
Transparency
The Bank of Japan
The US Federal Reserve System
Exchange Rate Targeting
Contractionary and Expansionary Monetary Policies and Their Limitations
What’s the Source of the Shock to the Inflation Rate?
Limitations of Monetary Policy
Interaction of Monetary and Fiscal Policy
The Relationship Between Monetary and Fiscal Policy
Practice Problems
Solutions
Learning Module 5 Introduction to Geopolitics
Introduction
National Governments and Political Cooperation
State and Non-State Actors
Features of Political Cooperation
Resource Endowment, Standardization, and Soft Power
The Role of Institutions
Hierarchy of Interests and Costs of Cooperation
Power of the Decision Maker
Political Non-Cooperation
Forces of Globalization
Features of Globalization
Motivations for Globalization
Costs of Globalization and Threats of Rollback
Threats of Rollback of Globalization
International Trade Organizations
Role of the International Monetary Fund
World Bank Group and Developing Countries
World Trade Organization and Global Trade
Assessing Geopolitical Actors and Risk
Archetypes of Country Behavior
The Tools of Geopolitics
The Tools of Geopolitics
Multifaceted Approaches
Geopolitical Risk and Comparative Advantage
Geopolitical Risk and the Investment Process
Types of Geopolitical Risk
Assessing Geopolitical Threats
Impact of Geopolitical Risk
Tracking Risks According to Signposts
Manifestations of Geopolitical Risk
Acting on Geopolitical Risk
Practice Problems
Solutions
Learning Module 6 International Trade
Introduction
Benefits and Costs of Trade
Benefits and Costs of International Trade
Trade Restrictions and Agreements—Tariffs, Quotas, and Export Subsidies
Tariffs
Quotas
Export Subsidies
Trading Blocs and Regional Integration
Types Of Trading Blocs
Regional Integration
Practice Problems
Solutions
Learning Module 7 The Foreign Exchange Market and Capital Flows
Introduction
The Foreign Exchange Market and Exchange Rates
Introduction and the Foreign Exchange Market
Market Participants
Market Composition
Exchange Rate Quotations
Exchange Rate Regimes: Ideals and Historical Perspective
The Ideal Currency Regime
Historical Perspective on Currency Regimes
A Taxonomy of Currency Regimes
Exchange Rates and the Trade Balance: Introduction
Capital Restrictions
Practice Problems
Solutions
Learning Module 8 Exchange Rate Calculations
Introduction
Cross-Rate Calculations
Forward Rate Calculations
Arbitrage Relationships
Forward Discounts and Premiums
Practice Problems
Solutions
Glossary