Effective Product Control

CHAPTER 13Profit and Loss Commentary

The daily P&L commentary is produced leveraging all the analytical reviews conducted by product control, in the execution of their daily controls. The commentary is an important control, as it provides the reader with an insight into how the desk generated their P&L for the day.

The reader is particularly interested in product control identifying instances where the desk's P&L is considered unusual. It is on these unusual days that product control provides more value to the reader, as it illustrates that this function has a good grasp on the financial results, their drivers and validity.

As a guide, the commentary should be constructed to focus on the following primary drivers of P&L, which are illustrated in Figure 13.1.

Figure 13.1 P&L commentary segments

We will reference the P&L results in Table 13.1 in examples throughout this chapter. The terms MTM P&L and market moves P&L will be used interchangeably.

Table 13.1 Daily P&L

Daily P&L
Trading Activity				Other
New TradesEntry P&L	IntradayMarketMoves	Amendments	TotalTradingActivity	MarketMoves	Funding	Valuationadjustments	Fees andcharges	TotalOther	GrandTotal
Trading	125,000	−100,000	17,000	42,000	729,000	−23,000	0	−15,000	−38,000	733,000
Sales	630,000	0	630,000	0	0	0	0	0	630,000
Total	755,000	−100,000	17,000	672,000	729,000	−23,000	0	−15,000	−38,000	1,363,000