Introduction To The Chartered Financial Analyst (cfa) Program
The Chartered Financial Analyst (CFA) designation is probably the best recognized qualification for finance professionals
.
It is primarily intended for professionals working in the front or middle office of an investment bank which can loosely be defined as the trading/investment and risk management roles respectively. However, in recent years the CFA Institute which issues the CFA designation has relaxed its requirements and employees working in the back office (ie operations and settlement) have been admitted to the CFA program.
In general, the basic requirements for entering the CFA program are :
- 3 years of relevant experience, which is normally defined as work within a role which directly investment decisions (note that this is very often loosely interpreted so back office workers are normally eligible).
- A university/college degree.
The examination process for CFA involves passing three exams :
CFA Level I which focuses on an introduction to asset valuation, financial reporting and analysis, and portfolio management techniques.
CFA Level II which focuses on advanced asset valuation, and includes applications of the tools used in asset valuation including economics, financial reporting and analysis, and quantitative methods.
CFA Level III which focuses on portfolio management, and includes more advanced strategies for applying the tools for asset valuation in managing equity, fixed income, and derivative investments for both individuals and institutions.
CFA Level I is a multi-choice exam whereas Levels II and III are both short answer exams.
Exams are for all three levels are held in June and December, so a candidate could complete the study course within 18 months provided they passed all three exams in sequence (prior to passing all three exams a candidate cannot use any derivative of the 'CFA' designation such as 'CFA Level II' in their title).
The CFA curriculum is quite varied but all topics are of direct relevance to investment banking professionals.
- Ethical and Professional Standards
- Quantitative Methods (such as statistical methods etc).
- Economics
- Accounting and Financial Reports Analysis
- Corporate Finance
- Investment Analysis of stocks, bonds, derivatives, venture capital, real estate.
- Portfolio Management and Analysis (portfolio risk, asset allocation, investment performance measurement, etc.)
The Ethical and Professional Standards topic is of the most importance since candidates who are on the margin of pass/fail will have their performance in the this topic examined to determine whether they are awarded a pass.
Annually a total of over 100,000 candidates take a CFA exam (either Level I, II or III). Typically the pass rate is between 35% to 60%.
by: Michael Sargent
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