TRADE LIFE CYCLE FOR FIXED INCOME SECURITIES—FAIR VALUE THROUGH PROFIT OR LOSS
Additional events in the trade life cycle
Let us assume the details as presented in Table 2.2 for the purpose of this illustration.
Buy the bond
Bonds are either subscribed at the initial offer through the primary market route or purchased through the secondary market. In a secondary market the buy order is placed through a broker known as counter party. Most corporate bonds are traded over-the-counter. If traded through the stock exchange, the concerned stock exchange usually takes the responsibility for specific performance of the contract ensuring that both legs of the contract are fulfilled by the respective parties. When an entity places the buy order and when the broker executes the same, it becomes a binding ...