Drive profit and manage risk with expert guidance on trade processing
The Trade Lifecycle catalogues and details the various types of trades, including the inherent cashflows and risk exposures of each. Now in its second edition, this comprehensive guide includes major new coverage of traded products, credit valuation adjustment, regulation, and the role of information technology. By reading this, you'll dissect a trade into its component parts, track it from preconception to maturity, and learn how it affects each business function of a financial institution. You will become familiar with the full extent of legal, operational, liquidity, credit, and market risks to which it is exposed. Case studies of real projects cover topics like FX exotics, commodity counterparty risk, equity settlement, bond management, and global derivatives initiatives, while the companion website features additional video training on specific topics to help you build a strong background in this fundamental aspect of finance.
Trade processing and settlement combined with control of risk has been thrust into the limelight with the recent near collapse of the global financial market. This book provides thorough, practical guidance toward processing the trade, and the risks and rewards it entails.
Gain deep insight into emerging subject areas
Understand each step of the trade process
Examine the individual components of a trade
Learn how each trade affects everything it touches
Every person working in a bank is highly connected to the lifecycle of a trade. It is the glue by which all departments are bound, and the aggregated success or failure of each trade determines the entire organization's survival. The Trade Lifecycle explains the fundamentals of trade processing and gives you the knowledge you need to further your success in the market.
Table of contents
- Foreword from the First Edition
- Foreword to the Second Edition
- About the Author
Part One: Products and the Background to Trading
Chapter 1: Trading
- 1.1 How and why do people trade?
- 1.2 Factors affecting trade
- 1.3 Market participants
- 1.4 Means by which trades are transacted
- 1.5 When is a trade live?
- 1.6 Consequences of trading
- 1.7 Trading in the financial services industry
- 1.8 What do we mean by a trade?
- 1.9 Who works on the trade and when?
- 1.10 Summary
- Chapter 2: Risk
- Chapter 3: Understanding Traded Products – Follow the Money
- Chapter 4: Asset Classes
- Chapter 5: Derivatives, Structures and Hybrids
- Chapter 6: Liquidity, Price and Leverage
- Chapter 1: Trading
Part Two: The Trade Lifecycle
- Chapter 7: Anatomy of a Trade
- Chapter 8: Trade Lifecycle
- Chapter 9: Cashflows and Asset Holdings
- Chapter 10: Risk Management
- Chapter 11: Market Risk Control
Chapter 12: Counterparty Risk Control
- 12.1 Reasons for non-fulfilment of obligations
- 12.2 Consequences of counterparty default
- 12.3 Counterparty risk over time
- 12.4 How to measure the risk
- 12.5 Imposing limits
- 12.6 Who is the counterparty?
- 12.7 Collateral
- 12.8 Activities of the counterparty risk control department
- 12.9 What are the risks involved in analysing credit risk?
- 12.10 Payment systems
- 12.11 Summary
- Chapter 13: Accounting
- Chapter 14: P&L Attribution
- Chapter 15: People
- Chapter 16: Regulation
Part Three: What Really Happens
- Chapter 17: Insights into the Real World of Capital Markets – Here be Dragons!
- Chapter 18: Case Studies
Chapter 19: The IT Divide
- 19.1 What is the IT divide?
- 19.2 What problems does it cause?
- 19.3 IT in the middle
- 19.4 Improper use of IT
- 19.5 Organisational blockers
- 19.6 IT blockers
- 19.7 How to bridge the gap
- 19.8 Keeping up with change
- 19.9 What does the business want from IT?
- 19.10 What IT wants from the business
- 19.11 Particular challenges of the financial sector
- 19.12 Example of a good project
- 19.13 Example of a bad project
- 19.14 Summary
- Chapter 20: The Role of the Quantitative Analyst
Part Four: Behind the Scenes
- Chapter 21: Developing Processes for New Products (and Improving Processes for Existing Products)
- Chapter 22: New Products
- Chapter 23: Testing
Chapter 24: Data
- 24.1 Common characteristics
- 24.2 Database
- 24.3 Data
- 24.4 Bid/offer spread
- 24.5 Curves and surfaces
- 24.6 Market data
- 24.7 Back testing
- 24.8 How can data go wrong?
- 24.9 Typical data sources
- 24.10 How to cope with corrections to data
- 24.11 Data integrity
- 24.12 The business risks of data
- 24.13 Summary
- Chapter 25: Reports
Chapter 26: Calculation
- 26.1 What does the calculation process actually do?
- 26.2 The calculation itself
- 26.3 Sensitivity analysis
- 26.4 Bootstrapping
- 26.5 Calculation of dates
- 26.6 Calibration to market
- 26.7 Testing
- 26.8 Integrating a model within a full system
- 26.9 Risks associated with the valuation process
- 26.10 Summary
- Part Five: Summary of Risks
- Appendix A: Operational Risks
- Appendix B: Human Risks
- Appendix C: Control Risks
- Appendix D: Processing Risks
- Appendix E: Organisational Risks
- Recommended Reading
- Title: The Trade Lifecycle: Behind the Scenes of the Trading Process, 2nd Edition
- Release date: October 2015
- Publisher(s): Wiley
- ISBN: 9781118999462
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