Arif Irfanullah
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- Jun 18, 2026
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After many years CFA Institute has added a reading to Level II Quantitative Methods. The new reading is on simulations. It is an excerpt from Aswath Damodaran’s book: Strategic Risk Taking: A Framework for Risk Management.
I just finished making a video lecture for this reading and quite enjoyed the exercise. While simulations are mentioned quite often across all three levels of the CFA Program, this is the first time that we have a reading which focuses on the subject.
Unlike the other Level II Quant readings, this reading is actually not at all quantitative. In fairly simple words Damodaran describes the overall process, the advantages and the issues associated with running simulations. He also addresses how to deal with risk when making investment decisions.
From a testability perspective, Level II candidates will have to learn several facts and concepts. There is an ugly formula in the reading but that is just part of a simulation example. The formula is not testable and does not need to be learnt.
Given the importance of simulations in many professional environments, a good understanding of this reading is likely to serve you well on the exam and in the real world.
I just finished making a video lecture for this reading and quite enjoyed the exercise. While simulations are mentioned quite often across all three levels of the CFA Program, this is the first time that we have a reading which focuses on the subject.
Unlike the other Level II Quant readings, this reading is actually not at all quantitative. In fairly simple words Damodaran describes the overall process, the advantages and the issues associated with running simulations. He also addresses how to deal with risk when making investment decisions.
From a testability perspective, Level II candidates will have to learn several facts and concepts. There is an ugly formula in the reading but that is just part of a simulation example. The formula is not testable and does not need to be learnt.
Given the importance of simulations in many professional environments, a good understanding of this reading is likely to serve you well on the exam and in the real world.