 # Level I CFA® Program Curriculum Changes from 2018 to 2019

For 2019, the major change is the addition of one reading – Fintech – in the Portfolio Management study session. This reading summarizes new technologies in the investment world such as big data, machine learning, distributed ledgers, and even Bitcoin.

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There has also been the deletion of the Financial Reporting Mechanics reading, which should not have a material impact for candidates re-taking the exam in 2019.

The area weights have also changed slightly. Most candidates will be happy to see that Financial Reporting and Analysis is now worth 5% less in the exam:

TOPIC
AREA
2019 2018
Ethics & Professional Standards 15% 15%
Quantitative Methods 10% 12%
Economics 10% 10%
Financial Reporting & Analysis 15% 20%
Corporate Finance 10% 7%
Equity Investments 11% 10%
Fixed Income 11% 10%
Derivative Investments 6% 5%
Alternative Investments 6% 4%
Portfolio Management & Wealth Management 6% 7%

Apart from that, here are some LOS changes that the candidate should take into account while preparing for the exam. (Deletions are in red and additions are in green.)

### 2019 Curriculum

#### Reading 10 – Common Probability Distributions

LOS 10a: define a probability distribution and distinguish between discrete and continuous random variables and their probability functions LOS 10a: define a probability distribution and distinguish between discrete and continuous random variables and their probability functions
LOS 10b: describe the set of possible outcomes of a specified discrete random variable LOS 10b: describe the set of possible outcomes of a specified discrete random variable
LOS 10c: interpret a cumulative distribution function LOS 10c: interpret a cumulative distribution function
LOS 10d: calculate and interpret probabilities for a random variable, given its cumulative distribution function LOS 10d: calculate and interpret probabilities for a random variable, given its cumulative distribution function
LOS 10e: define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable LOS 10e: define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable
LOS 10f: calculate and interpret probabilities given the discrete uniform and the binomial distribution functions LOS 10f: calculate and interpret probabilities given the discrete uniform and the binomial distribution functions
LOS 10g: construct a binomial tree to describe stock price movement LOS 10g: construct a binomial tree to describe stock price movement
LOS 10h: calculate and interpret tracking error LOS 10h: define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution
LOS 10i: define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform distribution LOS 10i: explain the key properties of the normal distribution
LOS 10j: explain the key properties of the normal distribution LOS 10j: distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution
LOS 10k: distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate normal distribution LOS 10k: determine the probability that a normally distributed random variable lies inside a given interval
LOS 10l: determine the probability that a normally distributed random variable lies inside a given interval LOS 10l: define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution
LOS 10m: define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret probabilities using the standard normal distribution LOS 10m: define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy’s safety-first criterion
LOS 10n: define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy’s safety-first criterion LOS 10n: explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices
LOS 10o: explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to model asset prices LOS 10o: distinguish between discretely and continuously compounded rates of return and calculate and interpret a continuously compounded rate of return, given a specific holding period return
LOS 10p: distinguish between discretely and continuously compounded rates of return and calculate and interpret a continuously compounded rate of return, given a specific holding period return LOS 10p: explain Monte Carlo simulation and describe its applications and limitations
LOS 10q: explain Monte Carlo simulation and describe its applications and limitations LOS 10q: compare Monte Carlo simulation and historical simulation
LOS 10r: compare Monte Carlo simulation and historical simulation

#### Reading 20 – Currency Exchange Rates

LOS20a: define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates LOS20a: define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates
LOS20b: describe functions of and participants in the foreign exchange market  LOS20b: describe functions of and participants in the foreign exchange market
LOS20c: calculate and interpret the percentage change in a currency relative to another currency LOS20c: calculate and interpret the percentage change in a currency relative to another currency
LOS20d: calculate and interpret currency cross-rates LOS20d: calculate and interpret currency cross-rates
LOS20e: convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation LOS20e: convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation
LOS20f: explain the arbitrage relationship between spot rates, forward rates, and interest rates  LOS20f: explain the arbitrage relationship between spot rates, forward rates, and interest rates
LOS20g: calculate and interpret a forward discount or premium  LOS20g: calculate and interpret a forward discount or premium
LOS20h: calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency LOS20h: calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency
LOS20i: describe exchange rate regimes LOS20i: describe exchange rate regimes
LOS 20j: explain the effects of exchange rates on countries’ international trade and capital flows

#### Reading 40  – Portfolio Risk and Return Part II

LOS 40a: describe the implications of combining a risk-free asset with a portfolio of risky assets LOS 41a: describe the implications of combining a risk-free asset with a portfolio of risky assets
LOS 40b: explain the capital allocation line (CAL) and the capital market line (CML)  LOS 41b: explain the capital allocation line (CAL) and the capital market line (CML)
LOS 40c: explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk  LOS 41c: explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk
LOS 40d: explain return generating models (including the market model) and their uses  LOS 41d: explain return generating models (including the market model) and their uses
LOS 40e: calculate and interpret beta  LOS 41e: calculate and interpret beta
LOS 40f: explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML) LOS 41f: explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)
LOS 40g: calculate and interpret the expected return of an asset using the CAPM  LOS 41g: calculate and interpret the expected return of an asset using the CAPM
LOS 40h: describe and demonstrate applications of the CAPM and the SML  LOS 41h: describe and demonstrate applications of the CAPM and the SML
LOS 41i: calculate and interpret the Sharpe ratio, Treynor ratio, M2, and Jensen’s alpha

#### Reading 43  – Fintech in Investment Management

LOS 43a: describe “fintech”
LOS 43b: describe Big Data, artificial intelligence, and machine learning
LOS 43c: describe fintech applications to investment management
LOS 43d: describe financial applications of distributed ledger technology

#### Reading 49 – Equity Valuation – Concepts and Basic Tools

LOS 49a: evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market  LOS 49a: evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market
LOS 49b: describe major categories of equity valuation models  LOS 49b: describe major categories of equity valuation models
LOS 49c: explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models LOS 49c: describe regular cash dividends, extra dividends, stock dividends, stock splits, reverse stock splits, and share repurchases
LOS 49d: calculate the intrinsic value of a non-callable, non-convertible preferred stock LOS 49d: describe dividend payment chronology
LOS 49e: calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate LOS 49e: explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models
LOS 49f: identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate LOS 49f: calculate the intrinsic value of a non-callable, non-convertible preferred stock
LOS 49g: explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables LOS 49g: calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate
LOS 49h: calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value LOS 49h: identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate
LOS 49i: describe enterprise value multiples and their use in estimating equity value  LOS 49i: explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables
LOS 49j: describe asset-based valuation models and their use in estimating equity value  LOS 49j: calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value
LOS 49k: explain advantages and disadvantages of each category of valuation model LOS 49k: describe enterprise value multiples and their use in estimating equity value
LOS 49l: describe asset-based valuation models and their use in estimating equity value
LOS 49m: explain advantages and disadvantages of each category of valuation model

LOS 51a: describe classifications of global fixed-income markets LOS 51a: describe classifications of global fixed-income markets
LOS 51b: describe the use of interbank offered rates as reference rates in floating-rate debt  LOS 51b: describe the use of interbank offered rates as reference rates in floating-rate debt
LOS 51c: describe mechanisms available for issuing bonds in primary markets LOS 51c: describe mechanisms available for issuing bonds in primary markets
LOS 51d: describe secondary markets for bonds LOS 51d: describe secondary markets for bonds
LOS 51e: describe securities issued by sovereign governments  LOS 51e: describe securities issued by sovereign governments
LOS 51f: describe securities issued by non-sovereign governments, quasi-government entities, and supranational agencies  LOS 51f: describe securities issued by non-sovereign governments, quasi-government entities, and supranational agencies
LOS 51g: describe types of debt issued by corporations  LOS 51g: describe types of debt issued by corporations
LOS 51h: describe short-term funding alternatives available to banks LOS 51h: describe structured financial instruments
LOS 51i: describe repurchase agreements and the risks associated with them LOS 51i: describe short-term funding alternatives available to banks
LOS 51j: describe repurchase agreements and the risks associated with them

#### Reading 52: Introduction to Fixed Income Valuation

LOS 52a: calculate a bond’s price given a market discount rate LOS 52a: calculate a bond’s price given a market discount rate
LOS 52b: identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity)  LOS 52b: identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity)
LOS 52c: define spot rates and calculate the price of a bond using spot rates  LOS 52c: define spot rates and calculate the price of a bond using spot rates
LOS 52d: describe and calculate the flat price, accrued interest, and the full price of a bond LOS 52d: describe and calculate the flat price, accrued interest, and the full price of a bond
LOS 52e: describe matrix pricing LOS 52e: describe matrix pricing
LOS 52f: calculate and interpret yield measures for fixed-rate bonds, floating-rate notes, and money market instruments LOS 52f: calculate and interpret yield measures for fixed-rate bonds, floating-rate notes, and money market instruments
LOS 52g: define and compare the spot curve, yield curve on coupon bonds, par curve, and forward curve  LOS 52g: define and compare the spot curve, yield curve on coupon bonds, par curve, and forward curve
LOS 52h: define forward rates and calculate spot rates from forward rates, forward rates from spot rates, and the price of a bond using forward rates  LOS 52h: define forward rates and calculate spot rates from forward rates, forward rates from spot rates, and the price of a bond using forward rates
LOS 52i: compare, calculate, and interpret yield spread measures.
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