Rank level 2 topics from hardest to easiest

CFA Level II
#1

Rank by difficulty, not weight. So topics you find harder because of abstract or under-explained concepts, or other reasons. 1. PM. I think PM has a really bad effort/exam-weight ratio. There’s tons of testable material, and we’ll probably only get 1 vignette on exam day. 2. Fixed Income. Not only is this 10-20% of the exam, but I feel like this has some of the hardest to grasp concepts in the entire curriculum. Key rate duration, convexity, CDS valuation, remembering all the qualitative theories and concepts. If I may be excused a pun, Ho Lee Sh1t.

  1. Derivatives. This is a no-brainer, as I feel like most candidates struggle with Derivatives. The CFAI text has no EOC questions, and to make matters worse, the practice questions on the site are quite easy and don’t cover a lot of areas in the topic. I found the coverage on BSM and swap valuation to be very light, given the emphasis in the learning objectives.

  2. FRA. I personally find the questions in FRA to be the most challenging due to the different variations of the same concept due to differences between US GAAP and IFRS. The exam weight is 15-20%, but the reading volume is about as light as PM.

  3. Ethics. I made the mistake of showing up for the exam like year with a level 1 Ethics mentality. I paid a dear price for it by failing Ethics. There are hundreds of examples in the level 2 Ethics text, and it takes a lot of careful reading to parse out the key points.

  4. AI. AI isn’t that hard, but I feel like it’s the most overlooked/underrated. After months of studying pension accounting, triangular arbitrage, swap valuation, memorizing over 300 equations and their variations, and all the qualitative definitions/theories, who wants to spend time for AI that’ll probably have a single vignette on the exam anyways?

  5. Corporate finance. Not that hard. Some memorization required, but hey, welcome to level 2.

  6. Equity. It’s 15-25%, and I think also the easiest to score on. A common difficulty with level 2 questions is that often times you’ll eliminate one option, and be left scratching your head between the two remaining options. With Equity, answers tend to be more black or white with less room for interpretation due to the emphasis on calculate-and-interpret. The trick with Equity is to be clear on the small details. Do I use long term Rf, or short term? Do I use D0 or D1?

  7. Economics/Quant. As an Econ major with background in Econometrics, I find these two to be the easiest.

#2

  1. Rank topics from the worst to easiest.

  2. Choose 5% the worst assuming 95 % confidence level.

  3. Choose the easiest of these 5 % worst

  4. Calculate VaR by historical simulation.

Tip of the day: You can use Monte Carlo approach as well.

#3

For me, most difficult to easiest:

  1. Ethics – usually can eliminate one but two left over are a coin flip

  2. Econ – questions can be easy if to do with exchange rates, but harder with the definition/concept questions

3-4. AI / PM - AI questions can be tedious while PM questions can be easy or hard, depending on how its worded.

5-7: Quant / FRA / Corp – Pretty comfortable here

8-9: Equity / FI - Very comfortable here

10: Derivatives – don’t think i’ve missed a question on derivatives, ever :slight_smile:

#4

what made derivatives so easy? i’m finding it bit difficult compared to others.

#5

Well, I used to trade options – specifically credit spreads such as bull put spreads and bear call spreads. I also have a series 7 license and that test focused extensively on options … The other concepts such as pricing models, futures and swaps just rang home though they are new to me.