Study guide
1.2 2026 Curriculum Structure & 10 Topic Weight Bands
CFA Level 2 Chartered Financial Analyst
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1 Introduction & CFA Level II Exam Strategy
1.1 CFA Level II Exam Overview & Item-Set Vignette Strategy 1.2 2026 Curriculum Structure & 10 Topic Weight Bands 1.3 300-Hour Study Plan, Calculator Mastery & Practical Skills Modules (PSM)
2 Ethical and Professional Standards
2.1 Code of Ethics & The Seven Standards of Professional Conduct 2.2 Vignette Analysis: Conflicts of Interest & Disclosure (Standard VI) 2.3 Duties to Clients (Standard III) & Duties to Employers (Standard IV) 2.4 Standard V: Investment Analysis, Recommendations & Actions and Standard VII: Responsibilities as a CFA Member or Candidate 2.5 Application of the Code and Standards: Level II Case Method 2.6 Recommended Procedures: Compliance Programs, Supervisory Systems & Firm Policies
3 Quantitative Methods
3.1 Multiple Linear Regression, ANOVA & Hypothesis Testing 3.2 Regression Diagnostics: Multicollinearity, Heteroskedasticity & Serial Correlation 3.3 Time-Series Analysis: AR Models, Nonstationarity & Cointegration 3.4 Machine Learning, Deep Learning & Big Data Projects 3.5 Extensions of Multiple Regression: Influence Analysis, Qualitative Variables & Logistic Regression 3.6 Big Data Projects: Wrangling, Exploration, Feature Engineering & Model Training
4 Economics for Valuation
4.1 Foreign Exchange Parity Relations & Equilibrium Exchange Rates 4.2 Economic Growth Theories & Production Function Analysis 4.3 Forward Points, the Carry Trade & Policy Effects on Exchange Rates 4.4 Growth Determinants: Natural Resources, Demographics, Convergence & Trade Openness
5 Financial Statement Analysis
5.1 Intercorporate Investments: Equity Method & Business Combinations 5.2 Employee Compensation: Defined Benefit Pension Plans & Share-Based Payments 5.3 Multinational Operations: Current Rate vs Temporal Translation 5.4 Analysis of Financial Institutions & The CAMELS Framework 5.5 Evaluating the Quality of Financial Reports & Accounting Adjustments 5.6 Integration of Financial Statement Analysis Techniques
6 Corporate Issuers
6.1 Analysis of Dividends: Policy Theories, Signaling & Taxation Systems 6.2 Share Repurchases: Methods, EPS and Book Value Effects & Payout Sustainability 6.3 Cost of Capital: Advanced Topics 6.4 Corporate Governance, Board Oversight & ESG Integration 6.5 Corporate Restructuring: Types, Motivations, Evaluation & Valuation 6.6 Restructuring Financial Effects: EPS, Net Debt to EBITDA, WACC & Divestitures
7 Equity Valuation
7.1 Equity Valuation Framework & Required Rate of Return Estimation 7.2 Discounted Dividend Valuation: Gordon Growth, Multistage & The H-Model 7.3 Free Cash Flow Valuation: FCFF and FCFE Modeling 7.4 Market-Based Valuation: Price and Enterprise Value Multiples 7.5 Residual Income Valuation 7.6 Private Company Valuation: Income, Market & Asset-Based Approaches 7.7 Choosing and Combining Models: Definitions of Value, Sum-of-the-Parts & Cross-Border Comparability
8 Fixed Income Analysis
8.1 The Term Structure and Interest Rate Dynamics: Spot, Forward & Swap Curves 8.2 The Arbitrage-Free Valuation Framework & Binomial Interest Rate Trees 8.3 Valuation and Analysis of Bonds with Embedded Options: OAS & Duration 8.4 Credit Analysis Models: Structural vs Reduced-Form Approaches 8.5 Credit Default Swaps (CDS): Mechanics, Pricing & Trading Strategies 8.6 Managing Yield-Curve Risk: Key Rate Durations, One-Sided Durations & Yield Volatility Structure
9 Derivatives & Risk Management
9.1 Pricing and Valuation of Forward Commitments: Equity, Fixed Income & FX 9.2 Swap Pricing and Valuation: Interest Rate, Currency & Equity Swaps 9.3 Contingent Claims: Binomial Option Pricing Model & Arbitrage Replication 9.4 The Black-Scholes-Merton (BSM) Model, Option Greeks & Dynamic Hedging 9.5 Interest Rate Options, Swaptions & the Black Model
10 Alternative Investments
10.1 Commodities and Commodity Derivatives: Sectors, Participants, Futures Returns & Indexes 10.2 Private Real Estate Investments: Direct Capitalization, DCF & Cost Approach 10.3 Public Real Estate Investments: REIT Structures, NAV, FFO & AFFO 10.4 Hedge Fund Strategies: Classification, Implementation & Portfolio Role 10.5 Real Estate Investment Features, Due Diligence & Index Construction Biases
11 Portfolio Management
11.1 Using Multifactor Models: Macroeconomic, Fundamental & Statistical Risk 11.2 Measuring and Managing Market Risk: VaR, CVaR & Stress Testing 11.3 Economics & Investment Markets: Business Cycles, Term Structure & Asset Allocation 11.4 Analysis of Active Portfolio Management & The Fundamental Law 11.5 Exchange-Traded Funds (ETFs): Creation, Arbitrage, Tracking & Applications 11.6 Backtesting and Simulation: Procedures, Metrics, Biases & Scenario Analysis
1.2 2026 Curriculum Structure & 10 Topic Weight Bands
Key Takeaways Explain This Topic AI
The 2026 Level II curriculum contains 45 learning modules across 10 topic areas, unchanged in count from 2025; the only change is the removal of one Machine Learning learning outcome on neural networks and reinforcement learning.
Five heavyweight topics — Ethics, Financial Statement Analysis, Equity, Fixed Income, and Portfolio Management — carry 10-15% each, together accounting for 50% to 75% of the exam.
Five secondary topics — Quantitative Methods, Economics, Corporate Issuers, Derivatives, and Alternative Investments — carry 5-10% each, or roughly one to two item sets apiece.
GIPS, capital budgeting, capital structure, mergers and acquisitions, and private equity are not on the 2026 Level II blueprint, despite appearing in older third-party materials.
Topic areas are randomly distributed across the two sessions, so no topic is confined to the morning or the afternoon.
Last updated: August 2026
1.2 2026 Curriculum Structure & 10 Topic Weight Bands
Core Insight: The 2026 CFA Level II curriculum is organized into 10 topic areas spanning 45 official Learning Modules. Unlike Level I, where weights are fixed percentages, Level II uses topic weight bands (ranges). Candidates must master a barbell structure: five heavyweight disciplines account for the majority of the exam, while five secondary topics provide essential breadth.
1. Official 2026 Topic Weight Bands & Module Distribution
The 10 curriculum topics are grouped into two distinct tiers: the Heavyweight Tier (10–15% weight each) and the Secondary Tier (5–10% weight each) .
Topic Area 2026 Weight Band Approximate Questions Typical Item Sets Official 2026 Learning Modules
Ethical & Professional Standards 10–15% 8–13 2–3 Code of Ethics and Standards of Professional Conduct; Guidance for Standards I–VII; Application of the Code and Standards: Level II (3 modules)
Financial Statement Analysis (FSA) 10–15% 8–13 2–3 Intercorporate Investments; Employee Compensation: Post-Employment and Share-Based; Multinational Operations; Analysis of Financial Institutions; Evaluating Quality of Financial Reports; Integration of Financial Statement Analysis Techniques (6 modules)
Equity Valuation 10–15% 8–13 2–3 Equity Valuation: Applications and Processes; Discounted Dividend Valuation; Free Cash Flow Valuation; Market-Based Valuation; Residual Income Valuation; Private Company Valuation (6 modules)
Fixed Income 10–15% 8–13 2–3 The Term Structure and Interest Rate Dynamics; The Arbitrage-Free Valuation Framework; Valuation and Analysis of Bonds with Embedded Options; Credit Analysis Models; Credit Default Swaps (5 modules)
Portfolio Management 10–15% 8–13 2–3 Economics and Investment Markets; Analysis of Active Portfolio Management; Exchange-Traded Funds; Using Multifactor Models; Measuring and Managing Market Risk; Backtesting and Simulation (6 modules)
Quantitative Methods 5–10% 4–9 1–2 Basics of Multiple Regression; Evaluating Regression Model Fit; Model Misspecification; Extensions of Multiple Regression; Time-Series Analysis; Machine Learning; Big Data Projects (7 modules)
Economics 5–10% 4–9 1–2 Currency Exchange Rates: Understanding Equilibrium Value; Economic Growth (2 modules)
Corporate Issuers 5–10% 4–9 1–2 Analysis of Dividends and Share Repurchases; ESG Considerations in Investment Analysis; Cost of Capital: Advanced Topics; Corporate Restructuring (4 modules)
Derivatives 5–10% 4–9 1–2 Pricing and Valuation of Forward Commitments; Valuation of Contingent Claims (2 modules)
Alternative Investments 5–10% 4–9 1–2 Introduction to Commodities and Commodity Derivatives; Overview of Types of Real Estate Investment; Investments in Real Estate through Publicly Traded Securities; Hedge Fund Strategies (4 modules)
Total Exam 100% 88 Questions 22 Item Sets 45 Learning Modules
Currency warning — what is not on the 2026 Level II blueprint. Several topics that older third-party materials still present as Level II content were removed when the curriculum was restructured. The 2026 Level II outline contains no GIPS module (GIPS is examined at Level III), no capital budgeting or capital structure module in Corporate Issuers, no mergers-and-acquisitions or takeover-defence module (replaced by Corporate Restructuring), and no private equity, venture capital, or infrastructure module in Alternative Investments. The only 2026 change from 2025 is the removal of one Machine Learning learning outcome covering neural networks, deep learning nets, and reinforcement learning; the 45 module count and all ten weight bands are unchanged.
- 2. The Heavyweight vs. Secondary Topic Dynamic
- The Heavyweight Core (50% to 75% Total Weight)
The five heavyweight topics— Ethics, FSA, Equity, Fixed Income, and Portfolio Management —collectively represent between 50% and 75% of the total exam score (equivalent to 11 to 16 item sets). A candidate who performs exceptionally well in these five areas establishes an almost insurmountable scoring foundation.
Equity Valuation & FSA Synergies: FSA is the engine that feeds Equity Valuation. Candidates must adjust accounting figures (e.g., capitalizing operating leases, adjusting defined benefit pension assumptions, translating foreign subsidiaries under temporal vs. current rate methods) before computing Free Cash Flow to Firm (FCFF) or Residual Income (RI).
Fixed Income & Derivatives Synergies: Fixed income valuation of callable and putable bonds using backward induction on binomial interest rate trees directly mirrors the binomial option pricing models covered in Derivatives.
The Secondary Tier (25% to 50% Total Weight)
The remaining five topics— Quantitative Methods, Economics, Corporate Issuers, Derivatives, and Alternative Investments —carry 5–10% each (typically 1 to 2 item sets each).
Exam Warning: Never "punt" (completely ignore) any 5–10% topic. Because each item set contains 4 questions (representing ~4.5% of total exam score), failing two item sets across Derivatives and Quant can easily drop a candidate's overall score by 9%, which is frequently the margin between passing and failing.
3. Cognitive Shift: Level I vs. Level II
The fundamental difference between Level I and Level II lies in the depth of cognitive application required: Level I: Conceptual Recall & Direct Formula Application
Example: "Given EBITDA and Enterprise Value, calculate the EV/EBITDA multiple."
Level II: Multi-Step Valuation & Narrative Financial Integration
Example: "Analyze a cross-border acquisition where the target uses IFRS and the acquirer uses US GAAP.
- Adjust the target's operating leases and defined benefit pension expense, translate the subsidiary
- balance sheet using the temporal method, derive normalized Free Cash Flow to Equity (FCFE), and
- calculate the maximum purchase price per share using a two-stage H-Model."
- Key Cognitive Dimensions Tested at Level II
Multi-Step Algebraic Calculations: Questions rarely involve single-step plug-and-chug arithmetic. You must derive intermediate inputs (e.g., calculating un-levered beta, adjusting for country risk premium, computing cost of equity, and then discounting non-constant dividend streams).
Financial Statement Normalization: Identifying off-balance-sheet obligations, aggressive revenue recognition, or transitory non-operating gains, and manually adjusting income and cash flow statements prior to valuation.
Cross-Topic Synthesis: Integrating economic forecasts (e.g., real GDP growth and inflation differentials) into foreign exchange spot-rate projections, which subsequently determine multinational translation adjustments in FSA.
4. Topic Distribution Across Testing Sessions
A persistent myth among Level II candidates is that certain topics are restricted to specific sessions (e.g., "Ethics is always in the morning" or "Asset classes are tested only in the afternoon").
Randomized Topical Allocation: On the computer-based exam, item sets from any of the 10 topics can appear in either the morning (Session 1) or afternoon (Session 2) .
Topic Splitting: Heavyweight topics with 2–3 item sets (such as Equity or FSA) may have 1 item set in the morning and 1–2 item sets in the afternoon.
Unpredictable Order: Within a session, item sets do not follow a fixed topic sequence; an Ethics vignette may be followed immediately by a Quantitative Methods time-series analysis, which is then followed by a Fixed Income credit default swap case.