The CFA Level 2 curriculum covers 45 Learning Modules across 10 core topics, each delving into the contextuality of the financial models and investments. Here is everything you need to know:
CFA Level 2 Topic Structure
The CFA Level 2 curriculum emphasizes applying knowledge to case studies, bridging the gap between theory and practice. It equips you to evaluate investments, assess risks, and formulate strategies, honing the analytical and decision-making skills essential in finance. The Level 2 curriculum and exam prepare you for the analytical challenges of professional finance roles, building a strong foundation for Level 3.
The chart below provides a high-level overview of each topic, including:
- Format: Two sessions of 2 hours and 12 minutes each, with an optional break.
- Distribution: Each session includes 11 item sets, totaling 22 across the exam. Of these, 20 are scored, and 2 are unscored.
- Integration: Topics are randomly placed, appearing in 1 or both sessions.
| CFA Level 2 Topics Overview | |||
|---|---|---|---|
| Topics | Weight | No. of Learning Modules |
No. of Questions |
| Ethical and Professional Standards | 10-15% | 3 | 8-12 |
| Quantitative Methods | 5-10% | 7 | 4-8 |
| Economics | 5-10% | 3 | 4-8 |
| Financial Statement Analysis | 10-15% | 7 | 8-12 |
| Corporate Issuers | 5-10% | 4 | 4-8 |
| Fixed Income | 10-15% | 5 | 8-12 |
| Portfolio Management | 10-15% | 6 | 8-12 |
| Equity Valuation | 10-15% | 6 | 8-12 |
| Derivative Investments | 5-10% | 2 | 4-8 |
| Alternative Investments | 5-10% | 4 | 4-8 |
CFA Level 2 Exam Topic Breakdown
Below, we break down each CFA Level 2 topic, including key details, tips, and a difficulty rating based on complexity, content volume, and candidate feedback.
The 2025 CFA Level 2 curriculum has seen only minimal changes, with the most notable update being a revised "Overview of Types of Real Estate Investment" reading within the Alternative Investments section. Overall, the curriculum remains largely the same as 2024. Visit our CFA Exam curriculum updates page for details.
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 10-15% | 3 | None | 8-12 | High |
Summary: Ethics in Level 2 revisits core concepts from Level 1, focusing on the CFA Institute's (CFAI) Code of Ethics and Standards of Professional Conduct. New topics include the Soft Dollar Standards, Research Standards, and Investment Guidelines. Questions in this section are more challenging as they are presented as item sets, requiring you to analyze scenarios across different contexts.
Objective: Apply the CFAI Code of Ethics and Standards of Professional Conduct in nuanced real-world scenarios, with a focus on identifying and addressing ethical dilemmas effectively.
Tip: Ethics questions often revolve around conflicts of interest and professional integrity. Practice interpreting multi-layered case studies to prepare for item-set questions.
Modules:
- Code of Ethics and Standards of Professional Conduct
- Guidance for Standards I-VII
- Application of the Code and Standards: Level II
Learn more about Ethical and Professional Standards.
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 5-10% | 7 | 50 | 4-8 | Moderate |
Summary: Quantitative Methods in Level 2 focuses on analytical tools and statistical methods, building on the foundational concepts from Level 1. Topics include discounted cash flow analysis, probability theory, and risk measurement, emphasizing their applications in security and asset evaluation.
Objective: Develop proficiency in applying statistical techniques to analyze financial data, measure risks, and support investment decision-making processes.
Tip: Master probability and cash flow analysis early. These skills are pivotal for solving advanced problems and understanding their implications in portfolio management.
Modules:
- Basics of Multiple Regression and Underlying Assumptions
- Evaluating Regression Model Fit and Interpreting Model Results
- Model Misspecification
- Extensions of Multiple Regression
- Time-Series Analysis
- Machine Learning
- Big Data Projects
Learn more about Quantitative Methods.
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 5-10% | 2 | 50 | 4-8 | Moderate |
Summary: Economics in Level 2 explores macroeconomic and microeconomic principles, including supply and demand, market structures, and fiscal and monetary policies. It extends into the business cycle's influence on economic activity and financial markets, focusing on government policies and global economic systems.
Objective: Apply economic theories to analyze the impact of macroeconomic and microeconomic factors on investment decisions, market behavior, and policy frameworks.
Tip: Use real-world examples to understand complex concepts, particularly exchange rates and trade balances, which frequently appear in the curriculum
Modules:
- Currency Exchange Rates: Understanding Equilibrium Value
- Economic Growth
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 10-15% | 6 | 40 | 8-12 | High |
Summary: Financial Statement Analysis in Level 2 dives into detailed evaluations of financial statements, emphasizing the impact of accounting standards and methods on financial reporting quality. Topics include inventory analysis, long-term assets, and income taxes, building a framework for comprehensive company analysis.
Objective: Analyze financial statements to assess a company's financial health, identify risks, and evaluate performance, emphasizing contrasting International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP).
Tip: Practice constructing and analyzing 3-statement models. Pay particular attention to adjustments required for differing accounting practices.
Modules:
- Intercorporate Investments
- Employee Compensation: Post Employment and Share-based
- Multinational Operations
- Analysis of Financial Institutions
- Evaluating the Quality of Financial Reports
- Integration of Financial Statement Analysis Techniques
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 5-10% | 4 | 40 | 4-8 | Moderate |
Summary: Corporate Issuers examines corporate governance, stakeholder management, and financing decisions. It emphasizes capital allocation, working capital management, and strategies to optimize corporate value while addressing the needs of stakeholders.
Objective: Develop a thorough understanding of corporate governance frameworks, financial decision-making, and their effects on long-term corporate value.
Tip: Focus on the principles behind net present value (NPV) and working capital management, ensuring you can apply them in real-world scenarios instead of relying solely on memorization.
Modules:
- Analysis of Dividends and Share Repurchases
- Environmental, Social, and Governance (ESG) Considerations in Investment Analysis
- Cost of Capital: Advanced Topics
- Corporate Restructuring
Learn more about Corporate Issuers.
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 10-15% | 5 | 60 | 8-12 | Moderate |
Summary: Fixed Income explores the characteristics, valuation, and risk factors of debt securities. Topics include bond valuation, yield spreads, and securitization, emphasizing credit analysis and risk measurement. This section lays the groundwork for understanding the fixed-income market and its role in portfolio management.
Objective: Gain a solid understanding of fixed-income securities, pricing mechanisms, and credit risk evaluation to assess bond performance and risk effectively.
Tip: Start with foundational concepts such as the Time Value of Money and Discounted Cash Flow analysis, as these underpin many fixed-income calculations.
Module:
- The Term Structure & Interest Rate Dynamics
- The Arbitrage-Free Valuation Framework
- Valuation & Analysis of Bonds with Embedded Options
- Credit Analysis Models
- Credit Default Swaps
Learn more about Fixed Income.
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 10-15% | 6 | 70 | 8-12 | High |
Summary: Portfolio Management in Level 2 builds on the basics introduced in Level 1, focusing on risk and return analysis, portfolio construction, and investment strategies tailored to individual and institutional clients. Topics include behavioral finance, risk management, and advanced techniques for optimizing portfolio performance.
Objective: Learn to structure, analyze, and manage portfolios, measure performance, and adapt strategies to meet diverse investment objectives.
Tip: Pay special attention to concepts such as the capital asset pricing model (CAPM), efficient frontier, and risk-adjusted returns. Practice applying portfolio metrics to case-based scenarios.
Modules:
- Economics and Investment Markets
- Analysis of Active Portfolio Management
- Exchange-Traded Funds: Mechanics & Applications
- Using Multifactor Models
- Measuring & Managing Market Risk
- Backtesting and Simulation
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 10-15% | 6 | 100 | 8-12 | Moderate |
Summary: Equity Valuations focuses on analyzing industries, companies, and equity securities using valuation models. This topic includes market structures, security indexes, and valuation tools such as the Gordon Growth Model. It also emphasizes applying quantitative and qualitative techniques to assess equity investments globally.
Objective: Develop a strong understanding of equity valuation techniques and apply them to analyze market structures, industries, and individual securities.
Tip: Practice valuation models extensively, including divided discount model (DDM) and discounted cash flow (DCF) methods. Use your calculator’s advanced functions to ensure speed and accuracy during the exam.
Modules:
- Equity Valuation: Applications and Processes
- Discounted Dividend Valuation
- Free Cash Flow Valuation
- Market-Based Valuation: Price and Enterprise Value Multiples
- Residual Income Valuation
- Private Company Valuation
Learn more about Equity Investments.
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 5-10% | 2 | 40 | 4-8 | Moderate |
Summary: Derivative Investments provides a conceptual framework for understanding derivatives and their valuation. Topics include forwards, futures, swaps, and options, as well as arbitrage and pricing mechanisms. This section introduces you to derivatives' benefits, risks, and applications.
Objective: Analyze and value derivative instruments by applying pricing models, arbitrage techniques, and the principles of replication.
Tip: Focus on understanding key concepts such as put-call parity and pricing models. Practice applying these concepts to real-world scenarios involving derivatives.
Modules:
- Pricing & Valuation of Forward Commitments
- Valuation of Contingent Claims
| Topic Weight | Modules | Formulas | Questions | Difficulty |
|---|---|---|---|---|
| 5-10% | 4 | 20 | 4-8 | Moderate |
Summary: Alternative Investments explores non-traditional asset classes such as hedge funds, private equity, real estate, commodities, and infrastructure. It highlights their diversification benefits, return potential, and role in portfolio management, along with differences from traditional investments.
Objective: Evaluate alternative investments and understand their unique characteristics, risks, and roles in improving portfolio performance.
Tip: Review key concepts including hurdle rates, high watermarks, and fee structures. Focus on understanding the advantages and limitations of each asset class.
Modules:
- Introduction to Commodities & Commodity Derivatives
- Overview of Types of Real Estate Investment
- Investments in Real Estate Through Publicly Traded Securities
- Hedge Fund Strategies
Learn more about Alternative Investments.
Most Difficult CFA Level 2 Topics
Determining the difficulty of CFA Level 2 topics can be subjective, but it often aligns with historical candidate performance and changes CFAI made to the curriculum. Certain topics consistently stand out as more challenging due to their depth and complexity.
- Financial Statement Analysis: Requires a solid grasp of formulas, calculations, and data interpretation. A significant portion of the exam focuses on using financial statement data to compute key values, making familiarity with the FSA formula sheet essential. Success in this area hinges on understanding how various data points feed into complex financial models and formulas.
- Ethical and Professional Standards: Requires critical thinking and judgment. The extensive reading and intricate scenarios presented in the exam make this topic particularly challenging, underscoring its importance in the program.is another important topic in Level 2, though it may seem similar to what you studied in Level 1.
- Portfolio Management: Requires a quick recall of the foundational concepts from Level 1, diving deeper into asset allocation, risk management, and performance evaluation. It’s a key focus if you want a career in portfolio management or investment strategy
Navigating These Challenges
Mastering these topics demands a strategic study approach that emphasizes understanding concepts rather than rote memorization. By honing your analytical skills and prioritizing your practice with vignette-style questions, you can tackle even the most challenging areas of CFA Level 2 with confidence.
CFA Level 2 Study Order
Your background may affect which topics you want to tackle first, but we recommend this study order because it builds skills progressively:
- Financial Statement Analysis
- Equity Valuation
- Portfolio Management
- Fixed Income
- Derivatives
- Alternative Investments
- Corporate Issuers
- Economics
- Quantitative Methods
- Ethical and Professional Standards (Review)
Why This Order Works
- Foundation First: Start with topics such as Financial Statement Analysis and Equity Valuation, which are essential for understanding others.
- Building Complexity: Move to more complex topics such as Portfolio Management and Fixed Income once you have a strong understanding of valuation.
- Revisit Ethics Last: Review ethics after understanding the material, ensuring you can apply ethical standards in context.
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