Study Notes for CFA® Level II – Economics – offered by AnalystPrep

Study Notes for CFA® Level II – Economics – offered by AnalystPrep

Reading 8: Currency Exchange Rates: Understanding Equilibrium Value

-a. Calculate and interpret the bid-offer spread on a spot or forward currency quotation and describe the factors that affect the bid-offer spread;

-b. Identify a triangular arbitrage opportunity and calculate the profit, given the bid-offer quotations for three currencies;

-c. Explain spot and forward rates and calculate the forward premium/discount for a given currency;

-d. Calculate the Mark-to-Mark Value of a forward contract;

-e. Explain international parity conditions (covered and uncovered interest parity, forward rate parity, purchasing power parity, and the international Fisher effect);

-f. Describe the relations among the international parity conditions;

-g. Evaluate the use of the current spot the rate, purchasing power parity and uncovered interest parity to forecast future spot rates of exchange;

-h. Explain approaches to assessing the long-run fair values of an exchange rate;

-i. Describe the carry trade and its relation to uncovered interest rate parity and calculate the profit from the carry trade;

-j. Explain how flows in the balance of payment accounts affect currency exchange rates;

-k. Explain the potential effects of monetary and fiscal policy on exchange rates;

-l. Describe objectives of the central bank or government intervention and capital controls and describe the effectiveness of the intervention and capital controls;

-m. Describe warning signs of a currency crisis;

Reading 9: Economic Growth 

-a. Compare factors favoring and limiting economic growth in developed and developing economies;

-b. Describe the relationship between the long-run rate of stock market appreciation and the sustainable growth rate of the economy;

-c. Explain why potential GDP and its growth rate matter for equity and fixed income investors;

-d. Contrast capital deepening investment and technological progress and explain how each affects economic growth and labor productivity;

-e. Demonstrate forecasting potential GDP based on growth accounting relations;

-f. Effect of Natural Resources on Economic Growth;

-g. Explain how demographics, immigration, and labor force participation affect the rate and sustainability of economic growth;

-h. Explain how investment in physical capital, human capital, and technological development affects economic growth;

-i. Compare classical growth theory, neoclassical growth theory, and endogenous growth theory;

-j. Explain and evaluate convergence hypotheses;

-k. Describe the economic rationale for governments to provide incentives to private investment in technology and knowledge;

-l. Describe the expected impact of removing trade barriers on capital investment and profits, employment and wages, and growth in the economies involved.

Reading 10: Economics of Regulation

-a. Describe the economic rationale for regulatory intervention;

-b. Explain the purposes of regulating commerce and financial markets;

-c. Describe anticompetitive behaviors targeted by antitrust laws globally and evaluate the antitrust risk associated with a given business strategy;

-d. Describe classifications of regulations and regulators;

-e. Describe uses of self-regulation in financial markets;

-f. Describe regulatory interdependencies and their effects;

-g. Describe tools of regulatory intervention in markets;

-h. Describe benefits and costs of regulation;

-i. Describe the considerations when evaluating the effects of regulation on an industry.

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    Daniel Glyn
    Daniel Glyn
    2021-03-24
    I have finished my FRM1 thanks to AnalystPrep. And now using AnalystPrep for my FRM2 preparation. Professor Forjan is brilliant. He gives such good explanations and analogies. And more than anything makes learning fun. A big thank you to Analystprep and Professor Forjan. 5 stars all the way!
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    michael walshe
    2021-03-18
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    Nyka Smith
    2021-02-18
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    Badr Moubile
    2021-02-13
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    Agustin Olcese
    2021-01-27
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    Jaak Jay
    2021-01-14
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    sindhushree reddy
    2021-01-07
    Crisp and short ppt of Frm chapters and great explanation with examples.