8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
1/18
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
2/18
FRA for CFA
L2: 1-Pager
3 readings:
Long lived assets
Inter Comp Inv, Post
Emp C, SBC, Multi NatOp
Quality
Ref core readings
Inter Corporate Investments
Equity Method - placed at costpurchased keeping goodwill adjusting dividends
Book market goodwill
Depreciation of purchased part atsame rate as it is done at book
Pooling of interest vs. Purchasemethod
Full and partial Goodwill Comparing both Consolidation vs.
Equity BS IS
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
3/18
Corp Fin forCFA L2: 1-
Pager
2 readings:
Corporate Governance
Merger & Acquisition
Ref core readings
Merger & Acquisition
Motivation
EPS Bootstrapping Assumingprice remains same?
Industry cycle
Defense HH Index
Carve out, spin offs, split offs andliquidation
DCF
Comparables
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
4/18
Corp Fin forCFA L2: 1-
Pager
2 readings:
Corporate Governance
Merger & Acquisition
Ref core readings
Corporate Governance
Attributes Conflict of Interest
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
5/18
Corp Fin forCFA L2: 1-
Pager
3 readings:
Budgeting
MM
ROC
Ref core readings
Budgeting
Question types cannot be many -
limitation can be set - end valuesrequire WC-change to replenish
WC-Change incorporate all other thingsso don't double count
Cash - - many things might not be cash
If something reduces your expenses itmight also give u some cash benefitfrom the dep (offsetting things)
EVA - Economic value add - remove the
cost of equity and find out things Comparing two projects - multiple non
natural number like 2.5 to either ones(common multiple)
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
6/18
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
7/18
Corp Fin forCFA L2: 1-
Pager
3 readings:
Ref core readings
Portfolio
Active management value add
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
8/18
Corp Fin forCFA L2: 1-
Pager
3 readings:
Budgeting
MM
ROC
Ref core readings
Dividends and Share Repurchase
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
9/18
Revision -FRA
for CFA L2
FRA has 3 readings:
Long lived assets
Inter Comp Inv,
Post Emp C, SBC,Multi Nat Op
Quality
15 Min video
CFApreponline.freegregmatclass.com
Qcfinance.in
Multi National Operations
Currency: Presentation, functional,Local
Translation: current (all) vs. temporal(just monetary)
Determine functional currency:Independent vs. dependent subsidiary
NI (plus in trans) vs. BS (plug inCurrent)
Net exposure (BS in current, realistic?)
vs. Net monetary exposure (in Trans,less volatile)
NI Current Avg, Tran Plug(mix) +Hist
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
10/18
FRA for CFA
L2: 1-Pager
3 readings:
Long lived assets
Inter Comp Inv,
Post Emp C, SBC,Multi Nat Op
Quality
15 Min video
CFApreponline.freegregmatclass.com
Qcfinance.in
Summary of all readings (3*3)
10 min on each
Examples of real companies
Real Fun Questions
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
11/18
Accounting for Investments
Ownership Degree of Influence Accounting Treatment
Less than 20%(Investments in financial
assets)
No Significant Influence Held-to-maturity,available-for-sale, held-
for-trading, or designatedat fair value (through P/L)
20%-50% (Investment inassociates)
Significant influence Equity method
More than 50%(Business combinations)
Control Acquisition Method
50%/50%(Joint Venture)
Shared Control IFRS: Proportionateconsolidated preferred; USGAAP: Equity Method
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
12/18
Classification of Financial Assets
Held-to-Maturity
Held-for-Trading
Available-for-sale
Balance Sheet Amortized cost Fair value Fair Value withunrealized G/Lrecognized inequity
Income Statement Interest(includingamortization)Realized G/L
InterestDividendsRealized G/LUnrealized G/L
InterestDividendsRealized G/L
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
13/18
Corp Fin forCFA L2: 1-
Pager
3 readings:
Ref core readings
Quant Methods Tough Areas
Unit Root - Covariance Stationary test the slope for 1 - Time Stationary
Co integrated both have unit root
DW test T- Stat derivation from SE
ARCH 1
Random Walk
Residual Income - Persistence level
Looking at one tailed t table to getthe values
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
14/18
Corp Fin forCFA L2: 1-
Pager
3 readings:
Ref core readings
Fixed Income MBS Market
Pass-through securities Pre payment risk
Ginnie Mae, Freddie Mae, FannieMae
SMM - CPR
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
15/18
Corp Fin forCFA L2: 1-
Pager
Readings:
Intro
Term Structure
MBS / CDO
Ref core readings
Bonds with Embedded Options
Binomial Models Spread Measure
Callable bonds
OAS over valued and under
valued
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
16/18
Corp Fin forCFA L2: 1-
Pager
Readings:
Intro
Term Structure
MBS / CDO
Ref core readings
Fixed Income
Term Structure and Volatilities ofInterest Rates
Spot Curve & Boot strapping
Key Rate Duration Barbell,
Laddar, and Bullet Forecast Yield Volatility
Volatility Scaling
220 PSA implies CPR = 17 0.2% 2.20 = 7.48%
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
17/18
Asset BackedSector of the
Bond Market
Fixed Income
Sector
Valuing MBS and ABS
Prepayment and Credit Trenchingof an ABS
External Credit Enhancement
Different loan backed securities
CDO cash flow analysis
8/12/2019 CFA Level 2 One Pagers v3-Shivgan-PC
18/18
Corp Fin forCFA L2: 1-
Pager
3 readings:
Swap Contract andContracts
Interest Rate DerivativeInstruments
Credit Derivatives
Ref core readings
Derivatives
Swap Market and Contracts Fixed vs floating
Deriving the formula
1000 = C/(1+R1) + C/(1+R2) + C /(1+ R3) + 1000/(1+R4)
Swaption - Valuing interest rateswaption
Fixed rate at conversion then
discounting it back
alternativeapproaches
FRA Pricing today
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