October 2012
Beginner
368 pages
10h 4m
English
Content preview from How the Trading Floor Really WorksBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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Trading Book Accounting
Although not an obviously exciting topic, the accounting of the trading book (both the market maker and the proprietary trading book) has a lot to do with trading floor mentality. The accounting for trading books is a concept called mark to market (MTM). This means that if the trading book buys 1 share for $10 and the price for that share at the end of the day is $12, the trading book has a profit, also called P&L, of $2 for that day. Every day, the value of that share is calculated against that day’s share price in the market and compared to the price the day before. Over time, if the trader then is able to buy another share at $12, and sell that same share for $14, that is a P&L of $2. At the end of the quarter, the ...
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