CFA Level 1 Topics

Ethical and Professional Standards are the foundation of the investment profession, building trust and integrity. This topic covers the CFA Institute Code of Ethics and seven Standards of Professional Conduct, guiding members to prioritize client interests and market integrity. Mastery requires applying these rules to complex, real-world ethical dilemmas.

Portfolio Management integrates concepts of risk and return to construct and manage a collection of assets. It involves creating an Investment Policy Statement (IPS) based on investor objectives and constraints, applying Modern Portfolio Theory (MPT) for optimal asset allocation, and understanding how behavioral biases can impact investment decisions.

Alternative Investments are assets outside of traditional stocks, bonds, and cash, offering potential diversification benefits. This topic covers diverse categories like private equity, real estate, hedge funds, commodities, and digital assets. Key characteristics include illiquidity, complex fee structures, less regulation, and unique valuation and risk management challenges.

Derivatives are financial contracts whose value is derived from an underlying asset. They are categorized as forward commitments (forwards, futures, swaps), which are obligations, or contingent claims (options), which grant rights. They are used for risk management, speculation, and arbitrage, and priced using no-arbitrage principles.

Fixed income involves debt securities that pay investors fixed or variable interest. This section covers bond features, valuation, and risk management. Key concepts include the inverse price-yield relationship, duration and convexity for measuring interest rate risk, credit analysis for assessing default risk, and the structure of asset-backed securities.

This section covers the fundamentals of equity investments. We explore market organization, security market indexes, and the Efficient Market Hypothesis. You will learn to differentiate security types, conduct industry and company analysis using frameworks like Porter's Five Forces, and apply various valuation models to determine a stock's intrinsic value.

This topic focuses on using financial statements to evaluate a company’s performance and financial position. Candidates will learn to analyze the income statement, balance sheet, and cash flow statement using techniques like ratio analysis, common-size analysis, and DuPont decomposition to assess profitability, liquidity, solvency, and support valuation decisions.

This topic covers the lifecycle of a corporation, from its legal structure and business model to its financing and investment decisions. Candidates will analyze how firms issue securities, manage stakeholder conflicts through corporate governance, make capital budgeting decisions, manage working capital, and determine an optimal capital structure to maximize value.

Economics covers microeconomic principles, including firm behavior and market structures, and macroeconomic concepts like business cycles, inflation, and growth. It analyzes the tools of fiscal and monetary policy used by governments and central banks. The topic extends to international trade, capital flows, and foreign exchange rate determination.

Quantitative Methods equips candidates with the fundamental mathematical and statistical framework used in investment decision-making. Key areas include the time value of money, probability theory, sampling and estimation, hypothesis testing, and regression analysis. Mastery of these tools is essential for valuing securities, measuring performance, and managing portfolio risk.