December 2015
Beginner
384 pages
11h 32m
English
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Chapter 14
Trading Places
In This Chapter
Figuring traders out
Managing traders
Modern financial risk management started on the trading floor and that remains the simplest place to observe its principles. Trading is primitive: You buy or you sell; you get rich or you go broke. Okay, not all trading is quite that simple, but all trading does retain a direct connection to markets, without as much institutional superstructure as other financial activities.
Managing trader risk is pure risk management, which makes it a good place to explore the basic concepts. Also, because everything in finance eventually depends on trading, a firm understanding of trading risk is essential to all financial risk management. Trading generates the prices used as inputs in all financial decisions, and all those decisions cause trading to occur immediately or somewhere down the line.
Understanding Traders
When I started in financial risk management, all financial risk managers were former traders. A deep appreciation for trading underlies a lot of the concepts built into the risk-management field. As risk management has grown, however, the supply of former traders with the other skills required to be risk managers is nowhere close to sufficient to meet the demand.
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.