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SYLLABUS OVERVIEW
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CONTENTS
MODULE 1: OVERVIEW 4
CHAPTER 1 The Investment Industry: A Top-Down View
MODULE 2: ETHICS AND REGULATION 6
CHAPTER 2 Ethics and Investment Professionalism
CHAPTER 3 Regulation and Supervision
MODULE 3: INPUTS AND TOOLS 8
CHAPTER 4 Microeconomics
CHAPTER 5 Macroeconomics
CHAPTER 6 International Trade and Foreign Exchange
CHAPTER 7 Financial Statements
CHAPTER 8 Quantitative Concepts
MODULE 4: INVESTMENT INSTRUMENTS 12
CHAPTER 9 Equity Securities
CHAPTER 10 Debt Securities
CHAPTER 11 Derivatives
CHAPTER 12 Alternative Investments
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MODULE 5: INDUSTRY STRUCTURE 15
CHAPTER 13 Structure of the Investment Industry
CHAPTER 14 Investment Vehicles and Structures
CHAPTER 15 Investment Market Characteristics
MODULE 6: INDUSTRY CONTROLS 18
CHAPTER 16 Risk Management
CHAPTER 17 Performance Evaluation
CHAPTER 18 Investment Industry Documentation
MODULE 7: SERVING CLIENT NEEDS 20
CHAPTER 19 Investor Needs and Investment Policy
CHAPTER 20 Asset Allocation
CHAPTER 21 Active and Passive Investment Management
EXAM WEIGHTING 22
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MODULE 1
OVERVIEW
It is about getting to the heart and the core
purpose of the investment industry its
vital role in the world: from helping people
save for the future to funding schools,
hospitals, roads and other essentials.
The benefits this brings when done well
(ethically and all parts working together)
help serve society.
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CHAPTER 1
THE INVESTMENT INDUSTRY: A
TOP-DOWN VIEW
After completing this chapter, you should be able to do
the following:
Explain how an economy benefits from the existence
of the investment industry;
Explain how an individual benefits from the existence
of the investment industry;
Describe types and functions of participants that
collectively comprise the structure of the investment
industry;
Describe forces that affect the evolution of the
investment industry.
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MODULE 2
ETHICS AND REGULATION
This module focuses on the essential
foundations for the investment world ethics
and regulation. The firm ground on which
we build for our clients: trust, reputation,
confidence and value the essentials of a
strong and healthy client-focused industry.
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CHAPTER 2
ETHICS AND INVESTMENT PROFESSIONALISM
After completing this chapter, you should be able to do
the following:
Describe the need for ethics in the investment industry;
Identify obligations that individuals in the investment
industry have to clients, prospective clients, employers,
and co-workers;
Describe the relevance of ethics to individuals that
work in the investment industry;
Identify the elements of the CFA Institute Code of
Ethics;
Explain the standards of practice (professional
principles) that are based on the CFA Institute Code of
Ethics;
Describe consequences of conduct that is unethical or
unprofessional;
Describe a framework for making ethical decisions.
CHAPTER 3
REGULATION AND SUPERVISION
After completing this chapter, you should be able to do
the following:
Describe objectives of regulation;
Describe a regulatory process and the importance of
each step in the process;
Identify specific types of regulation and describe the
reasons for each;
Describe a firms obligations to consumers and related
elements of corporate policies and procedures;
Describe potential consequences of inadequate
regulation and of failure to comply with regulations
and corporate policies and procedures.
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MODULE 3
INPUTS AND TOOLS
This is about understanding how the
(economic) world works the big
picture and the fine detail. How the
actions of individuals, corporations and
governments play out at micro, macro
and international levels, how this
translates to a companys finances,
and how to get a clearer understanding
of what this all means.
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CHAPTER 4
MICROECONOMICS
After completing this chapter, you should be able to do
the following:
Define economics and the concept of scarcity;
Differentiate between macroeconomics and
microeconomics;
Explain factors that affect quantity demanded and
quantity supplied;
Describe market equilibrium;
Describe and interpret price and income elasticities of
demand and their effects on quantity and revenue;
Describe how demand for a good is affected by
substitute and complementary goods and by market
supply;
Distinguish between economic profit and accounting
profit;
Explain production levels and costs, contrast fixed
and variable costs, and explain the law of diminishing
returns;
Identify factors that affect pricing;
Compare types of industry structure: perfect
competition, pure monopoly, monopolistic
competition, and oligopoly.
CHAPTER 5
MACROECONOMICS
After completing this chapter, you should be able to do the
following:
Describe why macroeconomic considerations
are important to an investment firm and how
macroeconomic information may be used;
Define gross domestic product (GDP) and GDP per
capita;
Identify basic components of GDP;
Describe economic growth and factors that affect it;
Describe phases of a business cycle and their
characteristics;
Explain the global nature of business cycles;
Describe economic indicators and their uses and
limitations;
Define inflation, deflation, stagflation, and
hyperinflation and describe their effects on
consumers, businesses, and investments;
Describe and compare monetary and fiscal policy;
Explain limitations of monetary policy and fiscal policy.
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CHAPTER 6
INTERNATIONAL TRADE AND FOREIGN
EXCHANGE
After completing this chapter, you should be able to do
the following:
Define imports and exports;
Explain the need for and benefit of international trade;
Describe comparative advantages among countries;
Describe the flows of goods, services, and capital in
international trade;
Define the balance of payments and explain the
relationship between the current account and the
capital account;
Compare fixed versus floating exchange rate systems;
Describe the functioning of the foreign exchange
market;
Compare spot and forward transactions;
Describe factors that cause appreciation and
depreciation of currencies.

CHAPTER 7
FINANCIAL STATEMENTS
After completing this chapter, you should be able to do
the following:
Describe information provided by the income
statement, balance sheet, and cash flow statement;
Compare types of assets, liabilities, and equity;
Explain links between the income statement, balance
sheet, and cash flow statement;
Distinguish between profit and net cash flow;
Identify and compare cash flow classifications of
operating, investing, and financing activities;
Explain the usefulness of ratio analysis for financial
statements;
Identify and interpret ratios used to analyze
a companys liquidity, profitability, financing,
shareholder return, and shareholder value.
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CHAPTER 8
QUANTITATIVE CONCEPTS
After completing this chapter, you should be able to do
the following:
Define the concept of interest;
Compare simple and compound interest;
Describe effects of time and discount rate on value;
Explain the relevance of the net present value in
valuing financial investments;
Explain uses of mean, median, mode, range,
percentile, and standard deviation;
Describe and interpret the characteristics of a normal
distribution;
Describe and interpret correlation.
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MODULE 4
INVESTMENT INSTRUMENTS
This module covers the basic investment options,
what they are and their purpose from conventional
equities and bonds to more specialized investments
such as real estate and derivatives.
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CHAPTER 9
EQUITY SECURITIES
After completing this chapter, you should be able to do
the following:
Describe differences in voting rights and other
ownership characteristics among different equity
classes;
Describe types and characteristics of equity
securities;
Distinguish between preferred stock and common
stock;
Describe global depository receipts;
Describe characteristics of convertible bond and
warrants;
Compare risk and return characteristics of types of
equity securities;
Describe approaches to valuing common stock;
Distinguish between an initial public offering (IPO) and
a seasoned equity offering;
Describe corporate actions that affect a companys
shares outstanding.
CHAPTER 10
DEBT SECURITIES
After completing this chapter, you should be able to do
the following:
Identify issuers of debt securities;
Describe types and characteristics of debt securities;
Explain seniority ranking of debt securities when
default occurs;
Describe characteristics of fixed-rate bonds, floating-
rate bonds, and zero-coupon bonds;
Describe characteristics of bonds with embedded
provisions;
Explain risks of investing in debt securities;
Describe the discounted cash flow approach to
valuing debt securities;
Explain the relationship between a bonds price and
its yield to maturity;
Compare a bonds yield to maturity and its current
yield;
Describe term structure of interest rates and credit
spreads.
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CHAPTER 11
DERIVATIVES
After completing this chapter, you should be able to do
the following:
Define a derivative contract and describe the uses of
derivatives contracts;
Distinguish between forwards, futures, options, and
swaps;
Distinguish between long and short positions in
derivative contracts;
Describe characteristics of derivative contracts;
Compare forward and futures contracts;
Explain the role of futures markets;
Describe option contracts and factors that affect
option values;
Describe swap contracts and identify factors that
affect swap values.

CHAPTER 12
ALTERNATIVE INVESTMENTS
After completing this chapter, you should be able to do
the following:
Describe advantages and limitations of alternative
investments;
Describe private equity investments;
Describe real estate investments;
Describe commodity investments.
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MODULE 5
INDUSTRY STRUCTURE
The industry is complex and highly
interdependent. This module looks at how the
industry helps us invest, who the participants
are and what they do, the different markets
where investments take place, and the
investment products themselves.
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CHAPTER 13
STRUCTURE OF THE INVESTMENT INDUSTRY
After completing this chapter, you should be able to do
the following:
Identify and describe types of individual and
institutional investors;
Describe needs served by the investment industry;
Describe services provided by the investment
industry, including financial planning, investment
advisory, investment information, trading, and
custodial and depository services;
Compare passive and active management, and
describe approaches used by active investment
managers to design their investment strategies;
Identify types of financial intermediaries, including
deposit-taking institutions, finance corporations,
securitizers, and insurance companies, and explain
their role in the investment industry;
Distinguish between buy- and sell-side firms in the
investment industry;
Distinguish between front-, middle-, and back-office
functions in the investment industry;
Identify positions and responsibilities for firms in the
investment industry;
Describe aspects of institutional investors investment
processes.
CHAPTER 14
INVESTMENT VEHICLES AND STRUCTURES
After completing this chapter, you should be able to do
the following:
Explain the purpose of security market indices,
identify their types, and describe uses of security
market indices in the investment industry;
Compare investing through direct investments in
securities and assets with investing through indirect
investments;
Describe structured investment products, including
linked notes, equity-linked annuities, and exchange
traded notes;
Distinguish among closed-end funds, open-
end mutual funds, exchange traded funds, and
unit investment trusts and identify their relative
advantages and limitations;
Describe the characteristics of hedge funds;
Describe the characteristics of funds of funds;
Explain the differences between separate accounts
and commingled accounts;
Compare investment in taxable and tax-advantaged
accounts;
Compare defined contribution and defined benefit
pension schemes.

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CHAPTER 15
INVESTMENT MARKET CHARACTERISTICS
After completing this chapter, you should be able to do
the following:
Distinguish between primary and secondary markets;
Identify characteristics of quote-driven, order-driven,
and brokered markets;
Compare the roles of brokers and dealers;
Explain the roles of exchanges and alternative trading
systems;
Compare long, short, and levered positions in terms of
risk and potential return;
Compare different orders and order instructions;
Describe steps for clearing and settlement of trades;
Identify types of transaction costs;
Describe market efficiency in terms of operations,
information, and allocation.
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MODULE 6
INDUSTRY CONTROLS
Controls are critical in helping ensure
everything runs smoothly. In the fast
moving world of investments and risk it is
essential to understand how systems and
controls are used in the industry to ensure
the client is properly served.
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CHAPTER 16
RISK MANAGEMENT
After completing this chapter, you should be able to do
the following:
Define risk and identify types of risk;
State the importance of risk management;
Describe a risk management process;
Describe benefits and costs of risk management;
Describe limitations of using models and historical
information to measure risk;
Define operational risk and explain how they are
managed;
Define compliance risk and explain how they are
managed;
Define investment risk and explain how they are
managed.

CHAPTER 17
PERFORMANCE EVALUATION
After completing this chapter, you should be able to do
the following:
Describe a performance evaluation process;
Describe measures of return, including holding-period
returns and time-weighted rates of return;
Compare arithmetic and geometric means rates of
returns;
Describe measures of risk, including standard
deviation, downside deviation, and reward-to-risk
ratios;
Describe uses of benchmarks and explain the
selection of a benchmark;
Explain measures of relative performance, including
tracking error and the information ratio;
Explain the concept of alpha;
Explain uses and processes of performance
attribution.

CHAPTER 18
INVESTMENT INDUSTRY DOCUMENTATION
After completing this chapter, you should be able to do
the following:
Define a document;
Describe objectives of documentation;
Describe document classification systems;
Describe types of internal documentation;
Compare internal and external documentation;
Describe types of external documentation;
Describe document management.
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MODULE 7
SERVING CLIENT NEEDS
This is about focusing on clients gaining
a clear understanding of their needs,
circumstances, motivations and ambitions
so investments can be allocated and
managed in the right way for them.
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CHAPTER 19
INVESTOR NEEDS AND INVESTMENT POLICY
After completing this chapter, you should be able to do
the following:
Describe the importance of identifying investor needs
to the investment process;
Describe and contrast types of investors;
Explain how needs differ among investors;
Describe the rationale for and structure of investment
policy statements in serving client needs.
CHAPTER 20
ASSET ALLOCATION
After completing this chapter, you should be able to do
the following:
Describe how portfolios are constructed to address
client investment objectives and constraints;
Compare strategic and tactical asset allocation.
CHAPTER 21
ACTIVE AND PASSIVE INVESTMENT
MANAGEMENT
After completing this chapter, you should be able to do
the following:
Compare active and passive investment management;
Explain factors necessary for profitable active
management;
Describe how active managers attempt to identify and
capture market inefficiencies.
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EXAM WEIGHTING
Questions in the examination will be allocated approximately as follows:
Module 1 5%
Module 2 10%
Module 3 20%
Module 4 20%
Module 5 20%
Module 6 20%
Module 7 5%
Note: These weightings may be subject to slight variation to allow for effective question
trialing and to achieve an equal balance of difficulty for all candidates.
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NOTES
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www.cfainstitute.org/claritas
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CFA Institute 2014. The Claritas mark is registered in several countries around the world.