Flashcards · Finance & Accounting
CFA Level III Flashcards
Free flashcards for CFA Level 3: flip each card to reveal the definition. Built from the CFA Level 3 glossary as a study aid, these are concept checks, not real exam questions.
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- Investment Policy Statement (IPS)
- A document of a client's objectives and constraints.
- Return objective
- The return a client needs or wants.
- Risk tolerance
- Ability plus willingness to take risk.
- Strategic asset allocation
- The long-term target mix of asset classes.
- Tactical asset allocation
- Short-term shifts away from the strategic mix.
- Rebalancing
- Trading back to target weights after drift.
- Liability-driven investing
- Structuring assets to meet future liabilities.
- Goals-based investing
- Allocating around specific client goals.
- Behavioural finance
- How biases affect investor decisions.
- Loss aversion
- Feeling losses more strongly than equal gains.
- Anchoring
- Over-relying on an initial reference point.
- Efficient frontier
- Portfolios with the best return for each risk level.
- Sharpe ratio
- Excess return per unit of total risk.
- Active return
- Portfolio return minus its benchmark return.
- Immunisation
- Matching duration to a liability horizon.
- Risk budget
- Allocating tolerable risk across positions.
- Pathway
- A Level III specialisation: Portfolio Management, Private Markets or Private Wealth.
- Code and Standards
- CFA Institute's ethics rules for members and candidates.