Book description
Every person working in an investment bank or hedge fund has a large part of his work connected to the lifecycle of a trade. It is the glue by which all the departments are bound and the aggregated success or failure of each trade determines the survival and growth of the entire organization. Trading has evolved from a humble apple grower wanting a stable price for his produce come harvest time, to a complex and exciting industry comprising a significant share of the global economy, and more recently, taking a hand in saving it. It is the fundamental activity of investment banks, hedge funds, pension funds and many other financial companies. There is no better way to understanding the workings of a financial institution than to follow the progress of a trade through all of its various stages and all the activities performed upon it.
In the aftermath of the financial crisis, the financial world has changed, with less emphasis on trading and entrepreneurial activity and more on risk management, regulation and auditing. In this new world order, there will be a much greater analysis of every trade, and all market participants will need to have a much better understanding of the impact of their work on the whole trade cycle.
This book will dissect a trade into its component parts, track it from pre-conception to maturity and how the trade effects each business function of a financial institution. As well as illustrating each part of the trade process, it will highlight the legal, operational, liquidity, credit and market risks to which the trade is exposed. Readers will benefit from a full understanding of all parts of the trade process, including derivative and credit derivative trades, and will also see, with examples where appropriate, how the mismanagement of these risks led to today's financial crisis.
Table of contents
- Dedication
- Title Page
- Copyright Page
- Preface
- Author’s Note
- Acknowledgements
-
Part I - Products and the Background to Trading
-
Chapter 1 - Trading
- 1.1 HOW AND WHY DO PEOPLE TRADE?
- 1.2 FACTORS AFFECTING TRADE
- 1.3 MARKET PARTICIPANTS
- 1.4 MEANS BY WHICH TRADES ARE TRANSACTED
- 1.5 WHEN IS A TRADE LIVE?
- 1.6 CONSEQUENCES OF TRADING
- 1.7 TRADING IN THE FINANCIAL SERVICES INDUSTRY
- 1.8 WHAT DO WE MEAN BY A TRADE?
- 1.9 WHO WORKS ON THE TRADE AND WHEN?
- 1.10 SUMMARY
- Chapter 2 - Risk
- Chapter 3 - Asset Classes
- Chapter 4 - Derivatives, Structures and Hybrids
- Chapter 5 - Credit Derivatives
- Chapter 6 - Liquidity, Price and Leverage
-
Chapter 1 - Trading
-
Part II - The Trade Lifecycle
- Chapter 7 - Anatomy of a Trade
- Chapter 8 - Lifecycle
- Chapter 9 - Cashflows and Asset Holdings
- Chapter 10 - Risk Management
- Chapter 11 - Market Risk Control
-
Chapter 12 - Counterparty Risk Control
- 12.1 REASONS FOR NON FULFILMENT OF OBLIGATIONS
- 12.2 CONSEQUENCES OF COUNTERPARTY DEFAULT
- 12.3 COUNTERPARTY RISK OVER TIME
- 12.4 HOW TO MEASURE THE RISK
- 12.5 IMPOSING LIMITS
- 12.6 WHO IS THE COUNTERPARTY?
- 12.7 COLLATERAL
- 12.8 ACTIVITIES OF THE COUNTERPARTY RISK CONTROL DEPARTMENT
- 12.9 WHAT ARE THE RISKS INVOLVED IN ANALYSING CREDIT RISK?
- 12.10 PAYMENT SYSTEMS
- 12.11 SUMMARY
- Chapter 13 - Accounting
- Chapter 14 - P&L Attribution
-
Part III - Systems and Procedures
-
Chapter 15 - People
- 15.1 TRADERS
- 15.2 TRADING ASSISTANTS
- 15.3 STRUCTURERS
- 15.4 SALES
- 15.5 RESEARCHERS
- 15.6 MIDDLE OFFICE (PRODUCT CONTROL)
- 15.7 BACK OFFICE (OPERATIONS)
- 15.8 QUANTITATIVE ANALYST
- 15.9 INFORMATION TECHNOLOGY
- 15.10 LEGAL
- 15.11 MODEL VALIDATION
- 15.12 MARKET RISK CONTROL DEPARTMENT
- 15.13 COUNTERPARTY RISK CONTROL DEPARTMENT
- 15.14 FINANCE
- 15.15 INTERNAL AUDIT
- 15.16 COMPLIANCE
- 15.17 TRADING MANAGER
- 15.18 MANAGEMENT
- 15.19 HUMAN RISKS
- 15.20 SUMMARY
- Chapter 16 - Developing Processes for New Products (and Improving Processes ...
- Chapter 17 - New Products
-
Chapter 18 - Systems
- 18.1 WHAT MAKES A GOOD SYSTEM?
- 18.2 IT PROCUREMENT
- 18.3 SYSTEM STAKEHOLDERS
- 18.4 THE IT TEAM
- 18.5 TIMELINE OF A PROJECT
- 18.6 PROJECT MANAGEMENT
- 18.7 THE IT DIVIDE
- 18.8 TECHNIQUES AND ISSUES RELATED TO IT
- 18.9 SYSTEMS ARCHITECTURE
- 18.10 DIFFERENT TYPES OF DEVELOPMENT
- 18.11 BUY VERSUS BUILD
- 18.12 SOFTWARE VENDORS
- 18.13 PERFORMANCE
- 18.14 PROJECT ESTIMATION
- 18.15 GENERAL THOUGHTS ON IT
- 18.16 SUMMARY
- Chapter 19 - Testing
-
Chapter 20 - Data
- 20.1 COMMON CHARACTERISTICS
- 20.2 DATABASE
- 20.3 TYPES OF DATA
- 20.4 BID/OFFER SPREAD
- 20.5 CURVES AND SURFACES
- 20.6 SETS OF MARKET DATA
- 20.7 BACK TESTING
- 20.8 HOW CAN DATA GO WRONG?
- 20.9 TYPICAL DATA SOURCES
- 20.10 HOW TO COPE WITH CORRECTIONS TO DATA
- 20.11 DATA INTEGRITY
- 20.12 THE BUSINESS RISKS OF DATA
- 20.13 SUMMARY
- Chapter 21 - Reports
- Chapter 22 - Calculation
- Chapter 23 - Mathematical Model and Systems Validation
- Chapter 24 - Regulatory, Legal and Compliance
- Chapter 25 - Business Continuity Planning
-
Chapter 15 - People
- Part IV - What Can Go Wrong, the Credit Crisis
- Appendix - Summary of Risks
- Recommended Reading
- Index
Product information
- Title: The Trade Lifecycle: Behind the Scenes of the Trading Process
- Author(s):
- Release date: August 2010
- Publisher(s): Wiley
- ISBN: 9780470685914
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