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Effective Product Control

Book Description

Improve the Effectiveness of your Product Control Function

Effective Product Control is a detailed how-to guide covering everything you need to know about the function. Considered essential reading for: 

  • New controllers entering the profession
  • Auditors and regulators reviewing product control
  • Established controllers wanting a refresher on the latest skills and core controls within the industry.

Encompassing both a technical skills primer and key insights into core controls used to mit­igate major risks emanating from trading desks, you will get expert advice on practical topics such as: 

  • The key IFRS and U.S. GAAP accounting standards for a trading desk
  • How to approach the pricing of a financial instrument
  • Market risk and how is it quantified
  • The controls necessary for a trading desk
  • Rogue trading and how it can be detected
  • Valuation adjustments and why they are necessary
  • How the prices used to value a trading portfolio are independently verified
  • The financial accounting entries used to record financial instruments in the balance sheet and profit & loss statement
  • Financial reporting and how the results of a trading desk are presented
  • How a new financial product can be introduced in a controlled manner

Complete with a wealth of insightful graphs, illustrations and real-world examples to enliven the covered material, the dependable answers you need are in Effective Product Control.   

Table of Contents

  1. Preface
  2. Acknowledgements
  3. About the Author
  4. Part 1 Working in Product Control
    1. CHAPTER 1 An Introduction to Product Control
      1. The Emergence of Product Control
      2. The Purpose of Product Control
      3. Different Types of Product Control
      4. Skills, Qualifications and Experience
      5. Organizational Structure
      6. The Desk
    2. CHAPTER 2 Changing Landscape of Product Control
      1. Offshoring
      2. XVA
      3. Greater Levels of Capital
      4. Greater Focus on Liquidity
      5. Notes
    3. CHAPTER 3 Key Stakeholders
      1. Front Office: Sales and Trading Desk
      2. Chief Operating Officers (COOs)
      3. Operations
      4. Middle Office
      5. Market Risk
      6. Financial Reporting
      7. Management Reporting
      8. Finance Change
      9. IT
      10. Operational Risk
      11. Regulatory Reporting
      12. Accounting Policy
      13. Tax
      14. Audit
      15. Finance Shared Service
      16. Summary
      17. Notes
  5. Part 2 Technical Skills
    1. CHAPTER 4 Accounting Standards: Recognition and Measurement
      1. IAS 39 Financial Instruments: Recognition and Measurement
      2. IFRS 9: Financial Instruments
      3. IFRS 13: Fair Value Measurement
      4. Notes
    2. CHAPTER 5 Market Risk
      1. What Is Market Risk and How Is It Generated?
      2. How Is Market Risk Measured by a Bank?
      3. Notes
    3. CHAPTER 6 Pricing Financial Instruments
      1. How to Approach the Pricing of a Financial Instrument
      2. Pricing examples
      3. Notes
    4. CHAPTER 7 Internal Control
      1. What is Internal Control?
      2. Establishing an Internal Control Framework
      3. Example of Front to Back Internal Controls
      4. Notes
  6. Part 3 Profit and Loss Controls
    1. CHAPTER 8 System Feeds, End of Day Rates and Profit and Loss Estimates
      1. System Feeds
      2. End of Day
      3. End of Day Rates
      4. P&L Estimate
      5. Notes
    2. CHAPTER 9 Review of New and Amended Trades
      1. New Trades
      2. Amended Trades
      3. Notes
    3. CHAPTER 10 Review of Mark-to-Market P&L
      1. Defining Mark-to-Market P&L
      2. Attributing MTM P&L
      3. Risk-Based P&L estimates
      4. Changes in the End of Day Prices
      5. When to Validate the MTM P&L
    4. CHAPTER 11 Funding, Fees and Charges
      1. Funding
      2. Fees and Charges
      3. Notes
    5. CHAPTER 12 Profit and Loss Adjustments
      1. The Need for P&L Adjustments
      2. Controlling P&L Adjustments
      3. Notes
    6. CHAPTER 13 Profit and Loss Commentary
      1. Who Is the Reader?
      2. When Is P&L Commentary Required?
    7. CHAPTER 14 Profit and Loss Reconciliations and Sign-Offs
      1. Flash vs. Actual
      2. Desk P&L Sign-off
      3. P&L Reconciliation
  7. Part 4 Valuations
    1. CHAPTER 15 Independent Price Verification
      1. Components to IPV Process
      2. Notes
    2. CHAPTER 16 Valuation Adjustments
      1. Why Valuation Adjustments Are Required
      2. Bid–Offer
      3. Day 1 Reserves
      4. Model Valuation Adjustment
      5. XVA and Collateral Agreements
      6. Recording and Reporting of VAs
      7. Notes
  8. Part 5 Balance Sheet Controls
    1. CHAPTER 17 Balance Sheet Substantiation and Analysis
      1. Substantiating the Balance Sheet
      2. Frequency of the Balance Sheet Substantiation
      3. Evidencing the Balance Sheet Substantiation
      4. Unsupported Balances
      5. Lines of Responsibility
    2. CHAPTER 18 Dividending of Profit and Loss and FX Selldown
    3. CHAPTER 19 Controlling Nostros
      1. Introduction to Nostros
      2. Controlling Nostros – Cash Breaks
      3. Risk-Weighting Cash and AVE breaks
      4. Provisioning for Nostro and AVE Breaks
      5. Notes
  9. Part 6 Financial Accounting and Reporting
    1. CHAPTER 20 Financial Accounting Entries
      1. Financial Accounting Entries
      2. Chart of Accounts
      3. Accounting Rules Engine
      4. Notes
    2. CHAPTER 21 Financial Reporting and Note Disclosures
      1. Context of Financial Reporting
      2. Profit and Loss
      3. Balance Sheet
      4. Netting
      5. Fair Value Hierarchy
      6. Notes
  10. Part 7 Supplementary Controls
    1. CHAPTER 22 New Product Proposals
      1. Starting Line
      2. The Review
      3. The Sign-Off
    2. CHAPTER 23 Rogue Trading
      1. The Forefathers of Rogue Trading
      2. The Fallout from Rogue Trading – The Bank
      3. The Fallout from Rogue Trading – The Industry
      4. Going Rogue
      5. UBS Rogue Trading Incident, 2011
      6. Notes
  11. Index
  12. EULA