15 Key Topics You need to Know for CFA L3 Morning Exam
We went through every old CFA Institute morning exam from 2006-2014, and picked out the 15 most common themes you should be aware of for the morning section.
1) IPS is key because it is worth a lot of points AND appears first, and often causes time management issues for candidates. Be able to state their risk tolerance and defend why you picked that. Liquidity and time horizon are by far the two most important constraints.
2) Pick between two or more pension funds or different foundation/endowments and be able to talk about which have greater ability to take risk and why
3) Know how to solve corner portfolios and pick the most suitable portfolio given an asset allocation. See more https://gostudy.io/blog/Corner-portfolios-are-an-important-concept-that-are-always-tested/
4) What makes hedge fund benchmarks problematic? What are the solutions to solve that?
5) ID behavioral biases from a passage--both emotional and cognitive and talk about why you selected that bias. See more at https://gostudy.io/blog/Behavior-Finance-Cram-Guide-Cognitive-and-Emotional-Biases
6) You should know about delta in terms of hedging with options, and know the butterfly spread
7) Cobb-Douglass, TFP, and differences in Fed Model vs Yardeni are common, as is the Taylor rule equation
8) Be able to adjust Beta/Duration with futures
9) Add an investment to the portfolio. See more here with here w/ https://gostudy.io/blog/When-to-Add-An-investment-to-a-Portfolio
10) Portfolio rebalancing VWAP vs. Implementation shortfall, corridor rebalancing and risk factors, and CPPI vs. Constant mix/Buy &Hold
11) ID a portfolio's style
12) Can you talk intelligently about ALM vs. AO and when one is more appropriate? see more at https://gostudy.io/blog/Managing-Institutional-Portfolios-Cram-Guide
13) Commodities, roll return and swap duration come up repeatedly
14) What macroeconomic factors contribute to higher GDP growth?
15) MVO vs. Black-Litterman
16) Concentrated Positions - strategies for diversification
Both our ultimate note package and cram guide come with guides to which problems are still relevant from the old CFA Mock exam. This close to the exam they remain an awesome way to maximize your last hours of study time.