The Trade Lifecycle: Behind the Scenes of the Trading Process

Author’s Note

This book is divided into four parts. The first part is entitled “Products and the background to trading”. It starts with a chapter on trading giving an overview of trading in general as well as that related to the financial services industry. The next chapter is a background to risk which is another important theme of the book. We then look into specific trades by examining asset classes, derivative products and a special chapter on credit derivatives. Part I concludes with a look at three important aspects of trading - liquidity, price and leverage.

Part II is “The trade lifecycle”. It starts with an anatomy of the trade which is the core element of the lifecycle. Then the lifecycle is analysed in detail followed by a chapter on cashflows and asset holdings which are directly influenced by the lifecycle. We then move on to four methods of direct monitoring of trades throughout their lifetime: risk management, market risk control, counterparty risk control and accounting. The part concludes with a discussion of P&L attribution.

Part III, “Systems and procedures” begins with a full description of the business functions in the lifecycle and the people who run the systems and procedures. The next chapter examines the notion of business processes followed by a chapter devoted to incorporating new products into the lifecycle. The chapter on systems illustrates the key role played by information technology followed by testing. The following three chapters on data, reports ...