Flashcards · Finance & Accounting
CFA Level II Flashcards
Free flashcards for CFA Level 2: flip each card to reveal the definition. Built from the CFA Level 2 glossary as a study aid, these are concept checks, not real exam questions.
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All 18 terms
- Vignette (item set)
- A short case followed by linked multiple-choice questions.
- Dividend discount model (DDM)
- Values equity as the present value of expected dividends.
- Gordon growth model
- A DDM with constant growth: value = D₁ ÷ (r − g).
- FCFF
- Free cash flow to the firm, used to value the whole firm.
- FCFE
- Free cash flow to equity, used to value the equity.
- Residual income
- Earnings above the required return on capital.
- Multiples
- Relative valuation using ratios such as P/E or EV/EBITDA.
- EV/EBITDA
- Enterprise value to earnings before interest, tax, depreciation and amortisation.
- Embedded option
- An option built into a bond, such as a call or put.
- Convexity
- How a bond's price sensitivity changes as yields change.
- Credit spread
- Extra yield over a risk-free bond for credit risk.
- Regression
- A statistical method relating a variable to one or more others.
- R-squared
- The share of variation a regression model explains.
- Swap
- An agreement to exchange cash flows, such as fixed for floating.
- Forward contract
- An agreement to trade an asset later at a set price.
- Hedge
- A position taken to offset a specific risk.
- Strategic asset allocation
- The long-term target mix of asset classes.
- Code and Standards
- CFA Institute's ethics rules for members and candidates.