Saturday, January 31, 2009

Investment Banking, Analysis and Portfolio Management Concepts Directory

I am developing a directory of concepts on knol platform. Prsently I am setting up the framework or structure. I shall create individual knols for each concept over a period of time.


Investment Banking, Analysis and Portfolio Management Concepts Directory (Ua to Uz)
http://knol.google.com/k/narayana-rao-kvss/copy-of-investment-banking-analysis-and/2utb2lsm2k7a/835

Tuesday, February 12, 2008

CFA Readings level 3

CFA Refresher Readings





Portfolio Management (Level III) Readings



“Code of Ethics and Standards of Professional Conduct”
Standards of Practice Handbook, 9th edition (CFA Institute, 2005)
Free download (PDF)

“Guidance” for Standards I–VII
Standards of Practice Handbook, 9th edition (CFA Institute, 2005)
Free download (PDF)

“Ethics in Practice”
Philip Lawton (CFA Institute, 2005)


“The Consultant”
Jules A. Huot, Ethics Cases (CFA Institute, 1996: adapted 2005)


“Pearl Investment Management (A), (B), and (C)”
Glen A. Holden, Jr., Ethics Cases (CFA Institute, 1996: adapted 2005)


Asset Manager Code of Professional Conduct
including Appendix A (CFA Institute, Centre for Financial Market Integrity, 2005)
Free download (PDF)

“Heuristic-Driven Bias: The First Theme”
Ch. 2, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin, (Oxford University School Press, 2002)

“Frame Dependence: The Second Theme”
Ch. 3, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin, (Oxford University School Press, 2002)

“Inefficient Markets: The Third Theme”
Ch. 4, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin, (Oxford University School Press, 2002)

“Portfolios, Pyramids, Emotions, and Biases”
Ch. 10, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin, (Oxford University School Press, 2002)

“Investment Decision Making in Defined Contribution Pension Plans”
Alistair Byrne, Pensions (Palgrave Macmillan, Vol. 10, 2004)

“The Folly of Forecasting: Ignore all Economists, Strategists, & Analysts”
James Montier, Global Equity Strategy (Dresdner Kleinwert Wasserstein, 24 August 2005)

“A Survey of Behavioral Finance”
Ch. 1, Advances in Behavioral Finance, Volume II, Edited by Richard H. Thaler (Princeton University Press, 2005)


“Alpha Hunters and Beta Grazers”
Martin L. Liebowitz, Financial Analysts Journal (CFA Institute, September/October 2005)


“Managing Individual Investor Portfolios”
Ch. 2, Managing Investment Portfolios: A Dynamic Process, 3rd edition, James W. Bronson, Matthew H. Scanlan, and Jan R. Squires (Wiley, 2007)

“Life-Cycle Investing”
Ch. 3, Investment Management for Taxable Private Investors, Jarrod Wilcox, Jeffrey E. Horvitz, and Dan diBartolomeo (The Research Foundation of CFA Institute, 2006)


Excerpts from Investment Management for Taxable Private Investors
Ch 4 and Ch. 6, Investment Management for Taxable Private Investors, Jarrod Wilcox, Jeffrey E. Horvitz, and Dan diBartolomeo (The Research Foundation of CFA Institute, 2006)


“Multiple Asset Locations”
Ch. 5, Integrated Wealth Management: The New Direction for Portfolio Managers, Jean L.P. Brunel (Euromoney Institutional Investors Plc, 2002)

“Low-basis stock”
Ch. 10, Integrated Wealth Management: The New Direction for Portfolio Managers, Jean L.P. Brunel (Euromoney Institutional Investors Plc, 2002)

“Goals-Based Investing: Integrating Traditional and Behavioral Finance”
Daniel Nevins, Journal of Wealth Management (Institutional Investors, 2004)


“Managing Institutional Investor Portfolios”
Ch. 3, Managing Investment Portfolios: A Dynamic Process, 3rd edition, R. Charles Tschampion, Laurence B. Siegel, Dean J. Takahashi, and John L. Maginn (Wiley, 2007)

"Allocating Shareholder Capital to Pension Plans"
Robert C. Merton, Journal of Applied Corporate Finance (Blackwell Publishing, 2006)

"Capital Market Expectations"
Ch. 4, Managing Investment Portfolios: A Dynamic Process, 3rd edition, John P. Calverley, Alan M, Meder, Brian D. Singer, and Renato Staub (Wiley, 2007)

"Macroanalysis and Microevaluation of the Stock Market"
Ch. 12, Investment Analysis and Portfolio Management, 8th edition, Frank K. Reilly and Keith C. Brown (South-Western, 2006)

“Asset Allocation”
Ch. 5, Managing Investment Portfolios: A Dynamic Process, 3rd edition, William F. Sharpe, Peng Chen, Jerald E. Pinto, and Dennis W. McLeavey (Wiley, 2007)


“Linking Pension Liabilities to Assets”
Aaron Meder and Renato Staub, (UBS Global Asset Management)


"Fixed-Income Portfolio Management - Part I"
Ch. 6, Managing Investment Portfolios: A Dynamic Process, 3rd edition, H. Gifford Fong and Larry D. Guin (Wiley, 2007)

“Relative-Value Methodologies for Global Credit Bond Portfolio Management”
Ch. 20, Jack Malvey, Fixed Income Analysis, 2nd edition, Frank J. Fabozzi, editor

"Fixed-Income Portfolio Management - Part II"
Ch. 6, Managing Investment Portfolios: A Dynamic Process, 3rd edition, H. Gifford Fong and Larry D. Guin (Wiley, 2007)

“Hedging Mortgage Securities to Capture Relative Value”
Ch. 23, Kenneth B. Dunn, Roberto M. Sella, and Frank J. Fabozzi, Fixed Income Analysis, 2nd edition, Frank J. Fabozzi (Wiley, 2007)

“Equity Portfolio Management”
Ch. 7, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Gary Gastineau, Andrew R. Olma, and Robert G. Zielinski (Wiley, 2007)

"International Equity Benchmarks"
Ch. 10, Benchmarks and Investment Management, Laurence B. Siegel (The Research Foundation of AIMR, 2003)
Free download (PDF)

“Corporate Governance”
Ch. 1, pp. 15-56, The Theory of Corporate Finance, Jean Tirole (Princeton University Press, 2006)

“Alternative Investments Portfolio Management”
Ch. 8, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Jot K. Yau, Thomas Schneeweis, Thomas R. Robinson, and Lisa R. Weiss (Wiley, 2007)

“Swaps”
Ch. 8, pp. 239-244, 259-262, Derivatives Markets, 2nd edition, Robert L. McDonald (Pearson Education, 2006)

“Commodity Forwards and Futures”
Ch. 6, Derivatives Markets, 2nd edition, Robert L. McDonald (Addison Wesley, 2006)

“Risk Management”
Ch. 9, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Don M. Chance, Kenneth Grant, and John Marsland, (Wiley, 2007)

“Risk Management Applications of Forward and Futures Strategies”
Ch. 6, Analysis of Derivatives for the CFA® Program, Don Chance (AIMR, 2003)

“Risk Management Applications of Option Strategies”
Ch. 7, Analysis of Derivatives for the CFA® Program, Don Chance (AIMR, 2003)

“Risk Management Applications of Swap Strategies”
Ch. 8, Analysis of Derivatives for the CFA® Program, Don Chance (AIMR, 2003)


“Monitoring and Rebalancing”
Ch. 11, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Robert D. Arnott, Terence E. Burns, Lisa Plaxco, and Philip Moore (Wiley, 2007)

“Execution of Portfolio Decisions”
Ch. 10, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Ananth Madhaven, Jack L. Treynor, Wayne H. Wagner (Wiley, 2007)

“Evaluating Portfolio Performance”
Ch. 12, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Jeffrey V. Bailey, Thomas M. Richards, and David E. Tierney (Wiley, 2007)

“Global Performance Evaluation”
Ch. 12, pp. 626-648, International Investments, 5th edition, Bruno Solnik and Dennis McLeavey (Addison Wesley, 2003)


“The Case for International Diversification”
Ch. 9, International Investments, 5th edition, Bruno Solnik and Dennis McLeavey (Addison Wesley, 2003)

“Currency Risk Management”
Ch. 11, International Investments, 5th edition, Bruno Solnik and Dennis McLeavey (Addison Wesley, 2003)

"Emerging Markets Finance"
Geert Bekaert and Campbell R. Harvey, Journal of Empirical Finance (Elsevier, 2003)

"Dreaming With BRICs: The Path to 2050"
Dominic Wilson and Roopa Purushothaman, Global Economics Paper Number 99 (The Goldman Sachs Group, Inc., 2003)


“Global Investment Performance Standards”
Ch. 13, Managing Investment Portfolios: A Dynamic Process, 3rd edition, Philip Lawton and W. Bruce Remington (Wiley, 2007)

CFA (Level III) Topic Overviews

CFA Refresher Readings



Portfolio Management (Level III) Topic Overviews



Study Session 1

Code of Ethics and Professional Standards

Readings in this study session establish a framework for ethical conduct in the investment profession. The principles and guidance presented in the CFA Institute Standards of Practice Handbook (SOPH) form the basis for the CFA Institute self-regulatory program to maintain the highest professional standards among investment practitioners. A clear understanding of the CFA Institute Code of Ethics and Standards of Professional Conduct (both found in the SOPH) should allow practitioners to identify and appropriately resolve ethical conflicts, leading to a reputation for integrity that benefits both the individual and the profession. Material under “Guidance” in the SOPH addresses the practical application of the Code of Ethics and Standards of Professional Conduct. The guidance for each standard reviews its purpose and scope, presents recommended procedures for compliance, and provides examples of the standard in practice.



Study Session 2

Ethical and Professional Standards in Practice

Using examples and case studies, the readings in this study session show the use of the CFA Institute Code of Ethics and Standards of Professional Conduct as a body of principles for ethical reasoning and decision making. The readings serve as effective aids in understanding and internalizing the values and standards presented in the CFA Institute Standards of Practice Handbook. By applying the Code and Standards to case study conflicts, the practitioner will gain experience identifying and explaining fundamental principles of conduct, which then become tools for dealing with real world challenges.




The Asset Manager Code of Professional Conduct uses the basic tenets of the CFA Institute Code of Ethics and Standards of Professional Conduct to establish ethical and professional standards for firms managing client assets. The Asset Manager Code of Professional Conduct also extends the Code and Standards to address investment management firm practices regarding trading, compliance, security pricing, and disclosure



Study Session 3

Behavioral Finance

Behavioral finance is introduced in the first study session on portfolio management because an understanding of the psychological factors that affect investment decision making is relevant for the management of both private wealth and institutional assets. There are two important aspects of these behavioral readings that should be considered within the context of portfolio management. First, behavioral finance provides insight into investors’ perceptions and preferences regarding financial risk; such insight can be helpful for understanding and serving clients. Second, with its analysis of the rationality of individual decision making, behavioral finance may provide a theoretical basis for investment strategies that attempt to exploit deviations from market efficiency.



Study Session 4
Private Wealth Management

Study Session 4 addresses the process of private wealth management and the construction of an investment policy statement (IPS) for the individual investor. The investment policy statement is a blueprint for investing the client’s assets. The IPS identifies the needs, goals, and risk tolerance of the investor, as well as the constraints under which the investment portfolio must operate, and then formulates an investment strategy that tax-efficiently reconciles these potentially conflicting requirements.




Because taxes and regulations vary from locality to locality, tax-efficient strategies for portfolio construction and wealth transfer are necessarily specific to the locality in which the investor is taxed. Study Session 4 focuses on investment strategies applicable to a wide range of localities. Although illustrations of such strategies may be presented from a country-specific perspective, practitioners should be able to apply the underlying investment principles to other tax settings.



Study Session 5

Portfolio Management for Institutional Investors

Broadly defined, institutional investors include defined benefit pension plans, defined contribution plans, foundations, endowments, insurance companies, banks, and investment intermediaries. Each group faces a unique set of portfolio management investment objectives and constraints that must be addressed in order to effectively manage their investment portfolios. This study session introduces the concepts and practices important to determining the investment policy statement for an institutional investment management client.



Study Session 6

Economic Concepts for Asset Valuation in Portfolio Management

After identifying the client’s objectives and constraints and creating an investment policy statement, the manager’s next task in the planning process is to formulate capital market expectations. These forecasts of risk and return characteristics for various asset classes form the basis for constructing portfolios that maximize expected return for given levels of risk. The first reading in Study Session 6 examines the process of setting capital market expectations and covers the major tools of economic analysis. The second reading specifically addresses the linkage between economic activity and stock market valuation.

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Study Session 7

Asset Allocation

After developing capital market expectations, the fourth and final task in the planning process is determining the strategic asset allocation. Here the manager combines the investment policy statement and capital market expectations to determine target asset class weights; maximum and minimum permissible asset class weights are often also specified as a risk-control mechanism. The investor may seek both single-period and multi-period perspectives in the return and risk characteristics of asset allocations under consideration. A single-period perspective has the advantage of simplicity. A multi-period perspective can address the liquidity and tax considerations that arise from rebalancing portfolios over time. Such a perspective can also address serial correlation (long- and short-term dependencies) in returns but is more costly to implement.


The first reading is a comprehensive overview of the topic. The second reading complements the first by delivering in detail a liabilities-sensitive approach to asset allocation using the example of a defined benefit pension plan.



Study Session 8

Management of Passive and Active Fixed Income Portfolios

The fixed-income market is one of the largest and fastest growing segments of the global financial marketplace. Government and private debt currently constitute close to half of the wealth in international financial markets.



The basic features of the investment management process are the same for a fixed-income portfolio as for any other type of portfolio. Risk, return, and investment constraints are considered first. As part of this first step, however, an appropriate benchmark must also be selected based on the needs of the investor. For investors taking an asset-only approach, the benchmark is typically a bond market index, with success measured by the portfolio’s relative investment return. For investors with a liability-based approach, success is measured in terms of the portfolio’s ability to meet a set of investor-specific liabilities. The first reading addresses these primary elements of managing fixed-income portfolios and introduces specific portfolio management strategies. The second reading introduces additional relative-value methodologies.



Study Session 9

Portfolio Management of Global Bonds and Fixed Income Derivatives

Study Session 9 builds on the basics of fixed-income portfolio management presented in Study Session 8 and introduces more targeted portfolio management strategies. In particular, Study Session 9 addresses international and emerging market strategies and the use of derivatives to manage interest rate and credit risks.



Study Session 10

Equity Portfolio Management

Because equity securities represent a significant portion of many investment portfolios, equity management is often a critical component of overall investment success. The role of equities in an investment portfolio, the three major approaches used to manage equity portfolios, and the evaluation of equity managers constitute the major focus of "Equity Portfolio Management." Management techniques such as benchmark selection and style analysis are presented as tools for effectively measuring and controlling equity portfolio attributes in an international environment in "International Equity Benchmarks." "Corporate Governance" addresses the alignment of interests between a corporation’s managers and its equity shareholders. Although other investor classes are also concerned with corporate governance, the issue is particularly relevant for equity portfolio managers. Agency problems and conflicts of interest reduce a company’s appeal to investors and therefore directly affect its valuation. The reading concludes with an examination of the relationship between a corporation and its stakeholders and the arguments for and against a stakeholder-based governance structure.


Study Session 11

Alternative Investments for Portfolio Management

Alternative investments comprise groups of investments with risk and return characteristics that differ markedly from those of traditional stock and bond investments. Common features of alternative investments include:



Relative illiquidity, which tends to be associated with a return premium as compensation
Diversifying potential relative to a portfolio of stocks and bonds
High due diligence costs
Unusually difficult performance appraisal, due to the complexity of establishing valid benchmarks



Many institutional and high-net worth individuals make portfolio allocations to alternative investments that are comparable in size to those they make to the traditional asset classes of stocks and bonds. In doing so, such investors may be seeking risk diversification and/or greater opportunities to apply active management skills and capture alpha. Portfolio managers who take advantage of the opportunities presented by alternative investments may have a substantial advantage over those who do not.


The first reading in Study Session 11 presents an overview of the investment classes generally considered as alternative investments. The balance of the study session examines the role of swaps, forwards, and futures in managing certain alternative investments.



Study Session 12

Risk Management

Effective risk management identifies, assesses, and controls numerous sources of risk, both financial and non-market related, in an effort to achieve the highest possible level of reward for the risks incurred. With the increasingly complex nature of investment management firms and investment portfolios, sophisticated risk management techniques have been developed to provide analysts with the necessary tools to properly measure the varying facets of risk. The reading in this study session describes a framework for risk management, focusing on the concepts and tools for measuring and managing market risk and credit risk.

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Study Session 13

Risk Management Applications of Derivatives

This study session addresses risk management strategies using forwards and futures, option strategies, floors and caps, and swaps. Collectively referred to as derivatives, these investment vehicles can be employed for a variety of risk management purposes, including modification of portfolio duration and beta, implementation of changes in asset allocation, and synthesis of cash market instruments. Derivatives strategies have proven useful to both investors and borrowers, which accounts for their broad appeal. A growing number of security types now have embedded derivatives, and portfolio managers must be able to account for their effect on the return/risk profile of the security. After completing Study Session 13, the practitioner will better understand the advantages and disadvantages of derivative strategies, including the difficulties in creating and maintaining a dynamic hedge.



Study Session 14

Execution of Portfolio Decisions

Because the investment process is not complete until securities are bought or sold, the quality of trade execution is an important determinant of investment results. The methods by which managers and traders interact with markets, choose appropriate trading strategies and tactics, and measure success in execution are key topics in "Execution of Portfolio Decisions."



Study Session 15

Monitoring and Rebalancing

Ongoing monitoring and rebalancing of the investment portfolio are integral parts of the portfolio management process. Portfolio managers must understand the reasons for monitoring portfolios and be able to formulate appropriate portfolio rebalancing policies.



Study Session 16

Performance Evaluation and Attribution

Performance evaluation is a feedback step in the investment management process. It plays an integral role in assessing manager skills, as well as confirming manager compliance with investment policy, and should be documented in the investment policy statement. Performance evaluation and attribution also provide an essential measurement service to investment managers themselves. Competent portfolio managers should be proficient in the use of current concepts and methodologies for calculating, benchmarking, and interpreting investment returns.



Study Session 17

Portfolio Management in a Global Context

This study session begins with a comprehensive survey, in "The Case for International Diversification", of the advantages and disadvantages of international diversification. The study session continues with an overview of currency management, as global investing involves not only exposure to local market returns but also to exchange rate movements. The final two readings address emerging markets, a dynamic and important sub-category of international investing. "Emerging Markets Finance" presents a summary of financial and economic research relevant to investors in emerging markets. The fourth reading examines the economic conditions under which certain developing countries could become a much stronger force in the world economy and the implications that would have for investors.



Study Session 18

Global Investment Performance Standards

The Global Investment Performance Standards (GIPS®) contain ethical and professional standards for presenting investment performance to prospective clients. These guidelines provide for standardized performance calculation and presentation across investment managers, enabling investors to objectively compare manager return histories and clearly evaluate performance. This study session consists of a single reading which provides grounding in the requirements of GIPS.

Saturday, February 9, 2008

CFA Level 3 GIPS Advertising Guidelines

LOS

u. state and explain the requirements for compliance with the GIPS Advertising
Guidelines.

Advertisements must include the following

A description of the firm

the GIPS advertising guidelines compliance statement.

A description of the strategy of the composite being advertised.

Period to period composite performance results

To indicate clearly whether the performanc shown is gross and/or net of investment management fees.

For the period for which the composite return is presented, bench mark total return is to be presented and a description of the bench mark is to be given.

The currency used to express returns has to be specified.

Use of derivatives for leverage as a part of the investment strategy.

Wednesday, February 6, 2008

STUDY SESSION 18 GLOBAL INVESTMENT PERFORMANCE STANDARDS

STUDY SESSION 18

GLOBAL INVESTMENT PERFORMANCE STANDARDS


The Global Investment Performance Standards (GIPS®) contain ethical and
professional standards for presenting investment performance to prospective
clients. These guidelines provide for standardized performance calculation and
presentation across investment managers, enabling investors to objectively compare
manager return histories and clearly evaluate performance. This study session
consists of a single reading which provides grounding in the requirements of GIPS.

LEARNING OUTCOMES


Reading 49: Global Investment Performance Standards

The candidate should be able to:

a. summarize the reasons for the creation of the GIPS standards, the Standards’
evolution, and their benefits to prospective clients and investment managers;

b. formulate the objectives, key characteristics, and scope of the GIPS standards;

c. explain the fundamentals of compliance with the GIPS standards, including the
definition of the firm, the conditions under which an investment management firm
can claim compliance, and the correct wording of the GIPS compliance statement;

d. state the requirements and recommendations of the GIPS standards with respect
to input data, including accounting policies related to asset valuation and
performance measurement;

e. summarize and justify the requirements of the GIPS standards with respect to
return calculation methodologies, including the treatment of large external cash
flows, cash and cash equivalents, and fees and expenses;

f. state the requirements and recommendations of the GIPS standards with
respect to composite return calculations, including methods for asset-weighting
portfolio returns;

g. explain the meaning of “discretionary” in the context of composite construction
and, given a description of the relevant facts, determine whether a portfolio is
likely to be considered discretionary;

h. explain the role of investment mandates, objectives, or strategies in the
construction of composites;

i. state the requirements and recommendations of the GIPS standards with respect
to composite construction, including switching portfolios among composites, the
timing of the inclusion of new portfolios in composites, and of the exclusion of
terminated portfolios from composites;

j. state the requirements and recommendations of the GIPS standards for asset
class segments carved out of multi-class portfolios;

k. state the requirements and recommendations of the GIPS standards with respect
to disclosures, including fees; the use of leverage and derivatives; conformity
with local laws and regulations that conflict with the GIPS standards; and
non-compliant performance records;

l. state the requirements and recommendations of the GIPS standards with respect
to presentation and reporting, including the required timeframe of compliant
performance records, annual returns, composite market values, and benchmarks;

m. explain the conditions under which the performance record of a past firm or
affiliation must be linked to or used to represent the historical record of a new
firm or affiliation;

n. evaluate the relative merits of high/low, interquartile range, and standard
deviation as measures of the dispersion of portfolio returns within a composite;

o. identify the types of investments that are subject to the GIPS standards for real
estate and private equity;

p. state and explain the provisions of the GIPS standards for real estate, and
calculate total return, income return, and capital return for real estate assets;

q. state and explain the provisions of the GIPS standards for private equity;

r. explain the private equity valuation principles, including the hierarchy of fair
valuation methodologies for private equity investments;

s. identify errors and omissions in given performance presentations, including real
estate and private equity performance presentations;

t. explain the purpose, scope, and process of verification;

u. state and explain the requirements for compliance with the GIPS Advertising
Guidelines.

CFA Level 3 Study Sessions

Study Session Readings
Study Session 1. Code of Ethics and Professional Standards (PDF) 1-2
Study Session 2. Ethical and Professional Standards in Practice (PDF) 3-6
Study Session 3. Behavioral Finance (PDF) 7-14
Study Session 4. Private Wealth Management (PDF) 15-20
Study Session 5. Portfolio Management for Institutional Investors (PDF) 21-22
Study Session 6. Economic Concepts for Asset Valuation in Portfolio Management (PDF) 23-24
Study Session 7.Asset Allocation (PDF)
25-26
Study Session 8. Management of Passive and Active Fixed Income Portfolios (PDF) 27-28
Study Session 9. Portfolio Management of Global Bonds and Fixed Income Derivatives (PDF) 29-30
Study Session 10. Equity Portfolio Management (PDF) 31-33
Study Session 11. Alternative Investments for Portfolio Management (PDF) 34-36
Study Session 12. Risk Management (PDF) 37
Study Session 13. Risk Management Applications of Derivatives (PDF) 38-40
Study Session 14. Execution of Portfolio Decisions (PDF) 41
Study Session 15. Monitoring and Rebalancing (PDF) 42
Study Session 16. Performance Evaluation and Attribution (PDF) 43-44
Study Session 17. Portfolio Management in a Global Context (PDF) 45-48
Study Session 18. Global Investment Performance Standards (PDF) 49