The Chartered Financial Analyst is a designation for people working in the investment industry. It is offered by the CFA Institute headquartered in the USA at Charlottesville, Virginia. The CFA Institute was previously known as the Association of Investment Management and Research(AIMR).

Earning the CFA Charter requires three years of relevant work experience and passing three levels of examinations. See the CFA Institute's website for details: www.cfainstitute.org[1]

The test is generally considered the equivalent of a Masters Degree in Finance, although this is somewhat subjective.

The major areas of study are Ethics, Quantitative Analysis, Economics, Accounting, Security Analysis, and Portfolio Management.

The ethics section is primarily concerned with compliance and reporting rules when managing other people's money, although there are some rules which pertain to more general professional behaviour (such as prohibitions against plagiarism). There are some rules that are specifically related to how the person taking the test can explain to other people that they are trying to obtain the CFA designation. All of these rules are delineated in the 'Code' and the 'Standards'. The Code is a broad code of ethical behaviour, stated in a brief paragraph. The Standards are a more comprehensive list of specific regulations.

The section on quantitative analysis is dominated by statistics. There is also a section on the time value of money (a dollar in a year is not worth as much as a dollar right now, so you must 'discount' the dollar by dividing by 1 plus the inflation rate). The statistics topics are fairly broad, but the main focii are risk analysis, hypothesis testing and regression analysis. For the test, there are two calculators allowed, both of which have special financial functions for statistics and time value of money. The test also features other quantitative topics, but these are covered in other sections. For example, calculating depreciation of assets is a part of financial statement analysis (accounting), and determining currency arbitrage is a part of international economics.

Both micro and macro economics are covered. There are sections for international economics, mainly related to currency conversions and how they are affected by international interest rates and inflation.

The accounting section is widely considered the 'meat' of the test, particularly at the second level. It is divided into financial statements analysis and corporate finance. Analysing financial statements considers the statement of cash flows, the balance sheet, and the income statement. Each of these documents gives a distinct view into the state and operations of a company. Corporate finance uses these views of the company to make decisions about projects, deciding how they will impact the company.

The section on security analysis is divided by the types of security. There is a general section on global markets, sections on equity (stocks), fixed income (bonds), and derivatives (futures, forwards, options and swaps). The first levels of the test require familiarity with these instruments, then the focus develops into correctly valuing them, and how to properly use them.

The final section is portfolio management. This section increases in importance with each of the three levels. Portfolio management is an analysis of the process of managing money. It depends heavily on all of the other topics. When managing money for others, ethics is obviously important. This section deals with how the investor's needs are met by the portfolio manager. Modern portfolio theory is also tested, the efficient frontier, Capital asset pricing model, etc.