CFA Level 2 Glossary
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The CFA Level II exam consists of 22 item sets comprised of vignettes with 88 accompanying multiple-choice questions.
Duration: The CFA Level II exam will be 4 hours and 24 minutes, split into two equal sessions of 2 hours and 12 minutes, with an optional break in-between.

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CFA Level 2 Topics & Weightage in 2022:
Ethics 10-15%​
Quantitative Methods 5-10%
Economics 5-10%
Financial Reporting & Analysis 10-15%
Corporate Finance 5-10%
Equity 10-15%
Fixed Income 10-15%
Derivatives 5-10%
Alternative Investments 5-10%
Portfolio Management 10-15%

CFA Level 2 Glossary
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25 Questions

1. A policy regime is one that selects a target path for the exchange rate with interven-tion in the foreign exchange market to achieve that path.

2. Heteroskedasticity in the error variance that is correlated with the values of the independent variable(s) in the regression.

3. Bias that may result when failed or defunct companies are excluded from member-ship in a group.

4. A pre-offer takeover defense mech-anism involving the corporate charter (e.g. - stag-gered boards of directors and supermajority provisions) .

5. An agreement between two parties to exchange a series of future cash flows.

6. A measure of the expected annual cash flow from the operation of a real estate investment after all expenses but before taxes.

7. Accounting method in which the only relevant transactions for the financial statements are those that involve cash.

8. A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option - or $0 - whichever is greater.

9. A mean computed after excluding a stated small percentage of the lowest and highest observations.

10. Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.

11. Changes to equity that bypass (are not reported in) the income statement; the diffe rence between comprehensive income and net income.

12. An estimation method based on the criterion of minimizing the sum of the squared residuals of a regression.

13. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power - as distinguished from growth or development as a consequence of a superior product - business acumen - or historical accident.

14. A purchase involving a buyer having essentially no material synergies with the target (e.g. - the purchase of a private company by a company in an unrelated industry or by a private equity firm would typically be a financial transaction) .

15. The price at which an asset or liability would change hands between a willing buyer and a willing seller whe n the former is not under any compulsion to buy and the latter is not under any compulsion to sell; the price that would be received to sell

16. The positive square root of the variance; a measure of dispersion in the same units as the original data.

17. A profitability ratio calculated as (net income - preferred divi-dends) divided by average common equity; equal to the return on equity ratio when no preferred equity is outstanding.

18. Next twelve months P/E: current market price divided by an estimated next twelve months EPS.

19. With respect to revenue recognition - a method that s ecifies that the portion of the total profit of the sale that . s recognized in each pe riod is deter-mined by the percentage of the total sales price for which the seller has received cash.

20. An option strategy that combines two bull or bear spreads and has three exercise prices.

21. Uncertainty with respect to the quantity of goods and services that a company is able to sell and the price it is able to achieve; the risk related to the uncertainty of revenues.

22. The property of having a non-constant variance; refers to an error term with the property that its variance differs across observations.

23. A legal contract specifYing the terms of a bond issue.

24. EPS) Netincome - minus preferred dividends - divided bythe number of common shares outstanding con-sidering all dilutive securities (e.g. - convertibledebt and options); the EPS that would result if alldilutive securities were converted into commonsh

25. The probability of correctly rejecting the null-that is - rejecting the null hypothesis when it is false.

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