What are the Subjects in the CFA Exam?

The CFA programme covers a broad range of financial aspects including, investment management, financial analysis, stocks, bonds, and derivatives. The Charter holds 3 levels, namely the Level 1, Level 2 and Level 3 exams, which are essential to obtaining the CFA Charter. While the core topics of testing remain the same throughout the different levels, the level of difficulty and complexity of questions increase as the Level increases. This article will give you an overview of the different subjects in the CFA Exam. 

Prepared through years of analysis, through its CFA Course Curriculum, the institute ensures that candidates with effective and ethical investment standards enter into the industry. The curriculum is built from the CFA Institute Body of Knowledge, taking you deep into investment management by cutting across these 10 key areas.

Subjects in the CFA Exam:

Ethical and Professional Standards

This mainly focuses on learning practices that put investors first in critical and everyday practice. This is one of the most important areas of study in CFA as the certification program is dedicated to the promotion of universal professional ethics. This is evident in subject weightage as well where ethics is one area which receives comparative weightage in all 3 CFA Levels. This subject covers code of ethics, professional standards and Global Investment Professional Standards (GIPS) as larger part of the ethics aspect as applicable to the financial industry.

Quantitative Methods

From time value of money analysis to correlation analysis and regression, this module head involves learning about such robust quantitative methods. This section is focused on quantitative analysis and mathematically-oriented approaches to address complex financial issues which make this knowledge area of such great value. Some of the most important areas covered in this section include performance measurement, time value of money, statistics and probability basics, sampling and hypothesis testing along with correlation and linear regression analysis.

A study of these concepts provides some highly useful tools and techniques for the knowledge areas of fixed income, equities and portfolio management. A proper understanding and grasp of quantitative techniques would help master a good proportion of CFA’s body of knowledge. If you are from an engineering/maths background, then you should not face many issues here.

Economics

This section covers the fundamentals of micro as well as macroeconomics with its primary focus on the latter. Delve into supply and demand, the monetary system, inflation, effects of government regulation, and much more. 

Financial Reporting and Analysis

This exam tests the knowledge of financial ratios and financial statements commonly employed for the purpose of financial analysis. Along with this, one should be well-conversant in the concepts of revenue recognition, accounts receivables, and inventory analysis along with taxes and long-term assets. It must be kept in mind while preparing for this exam that local accounting practices do not hold much relevance as CFA is more of a global exam and focuses on US GAAP and IFRS practices. Learn the details of the financial reporting system (emphasis on international standards, IFRS) and analysis of taxes, debt, global operations, and more.

Corporate Finance

From corporate governance to capital structure decisions, the course covers complex issues in corporate finance. This section is rather limited in its scope and covers areas related to capital budgeting, NPV IRR, cost of capital, measures of leverage, basics of dividends and share repurchases along with working capital management and corporate governance of listed companies.

Equity Investments

This section primarily deals with equity markets and covers various tools and techniques available for valuation of companies – DCF, PE, PBV, PCF, etc. In this portion, study the types of equity securities, equity portfolio measurements, and much more.

Fixed Income

This section covers fixed income markets and instruments and their pricing techniques. Important concepts including yield measures, duration and convexity are discussed here. Study of fixed income security types, portfolio benchmarks, and other complex topics are also included under this head.

Derivatives

Learn about forward markets, future markets, option markets, and more including the fundamentals of futures, forwards, options, swaps, and hedging techniques usually employed.

Alternative Investments

This section includes forms of investment not covered under other knowledge areas of CFA. This includes real estate funds, venture capital, hedge funds and commodities. There is a special focus on commodities so it would be helpful for participants to have an in-depth awareness of concepts related to trading in commodities. Examine real estate, private equity, commodities, and more.

Portfolio Management and Wealth Planning

This section deals with fundamental principles of portfolio management and introduces some key concepts including Modern Portfolio Theory and Capital Asset Pricing Model. Under this, examine the essentials of managing different types of portfolios successfully.

Level-wise Distribution and Weightage of Subjects in the CFA Exam

The grand total of each level is 100 marks.