The Trade Lifecycle Of A Trade - Behind The Scenesof The Trading Process 9780470685914 2025 chm pdf kindle rb azw3 下载 115盘

　　Every person working in an investment bank or hedge fund has a

large part of his work connected to the lifecycle of a trade. It is

the glue by which all the departments are bound and the aggregated

success or failure of each trade determines the survival and growth

of the entire organization. Trading has evolved from a humble apple

grower wanting a stable price for his produce come harvest time, to

a complex and exciting industry comprising a significant share of

the global economy, and more recently, taking a hand in saving it.

It is the fundamental activity of investment banks, hedge funds,

pension funds and many other financial companies. There is no

better way to understanding the workings of a financial institution

than to follow the progress of a trade through all of its various

stages and all the activities performed upon it.

In the aftermath of the financial crisis, the financial world has

changed, with less emphasis on trading and entrepreneurial activity

and more on risk management, regulation and auditing. In this new

world order, there will be a much greater analysis of every trade,

and all market participants will need to have a much better

understanding of the impact of their work on the whole trade

cycle.

This book will dissect a trade into its component parts, track it

from pre-conception to maturity and how the trade effects each

business function of a financial institution. As well as

illustrating each part of the trade process, it will highlight the

legal, operational, liquidity, credit and market risks to which the

trade is exposed. Readers will benefit from a full understanding of

all parts of the trade process, including derivative and credit

derivative trades, and will also see, with examples where

appropriate, how the mismanagement of these risks led to today's

financial crisis.

Preface.

Author’s Note.

Acknowledgements.

PART I PRODUCTS AND THE BACKGROUND TO TRADING.

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.

2 Risk.

2.1 Introduction.

2.2 Risk is inevitable.

2.3 Quantifying risk.

2.4 Methods of dealing with risk.

2.5 Managing risk.

2.6 Problems of unforeseen risk.

2.7 Summary.

3 Asset Classes.

3.1 Interest rates.

3.2 Foreign exchange (FX).

3.3 Equity.

3.4 Bonds and credit.

3.5 Commodities.

3.6 Trading across asset classes.

3.7 Summary.

4 Derivatives, Structures and Hybrids.

4.1 What is a derivative?

4.2 Linear.

4.3 Nonlinear.

4.4 Some option terminology.

4.5 Option valuation.

4.6 Exotic options.

4.7 Structures and hybrids.

4.8 Importance of simpler products.

4.9 Trade matrix.

4.10 Summary.

5 Credit Derivatives.

5.1 Introduction.

5.2 CDS.

5.3 CLN.

5.4 CDO.

5.5 Data relating to CDOs.

5.6 Practical aspects of CDO management.

5.7 Practical aspects of CDO valuation.

5.8 Why are credit derivatives different?

5.9 Summary.

6 Liquidity, Price and Leverage.

6.1 Liquidity.

6.2 Price.

6.3 Leverage.

PART II THE TRADE LIFECYCLE.

7 Anatomy of a Trade.

7.1 The underlying.

7.2 General.

7.3 Economic.

7.4 Sales.

7.5 Legal.

7.6 Booking.

7.7 Counterparty.

7.8 Timeline.

8 Lifecycle.

8.1 Pre Execution.

8.2 Execution and booking.

8.3 Confirmation.

8.4 Post booking.

8.5 Settlement.

8.6 Overnight.

8.7 Changes during lifetime.

8.8 Reporting during lifetime.

8.9 Exercise.

8.10 Maturity.

8.11 Example trade.

8.12 Summary.

9 Cashflows and Asset Holdings.

9.1 Introduction.

9.2 Holdings.

9.3 Value of holding.

9.4 Reconciliation.

9.5 Consolidated reporting.

9.6 Realised and unrealised P&L.

9.7 Diversification.

9.8 Bank within a bank.

9.9 Custody of securities.

9.10 Risks.

9.11 Summary.

10 Risk Management.

10.1 Traders.

10.2 Risk control.

10.3 Trading management.

10.4 Senior management.

10.5 How do risks arise?

10.6 Different reasons for trades.

10.7 Hedging.

10.8 What happens when the trader is not around?

10.9 Types of risk.

10.10 Trading strategies.

10.11 Hedging strategies.

10.12 Summary.

11 Market Risk Control.

11.1 Various methodologies.

11.2 Need for risk.

11.3 Allocation of risk.

11.4 Monitoring of market risk.

11.5 Controlling the risk.

11.6 Responsibilities of the market risk control department.

11.7 Limitations of market risk departments.

11.8 Regulatory requirements.

11.9 Summary.

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.

13 Accounting.

13.1 Balance sheet.

13.2 Profit and loss account.

13.3 Financial reports for hedge funds and asset managers.

14 P&L Attribution.

14.1 Benefits.

14.2 The process.

14.3 Example.

14.4 Summary.

PART III SYSTEMS AND PROCEDURES.

15 People.

15.1 Traders.

15.2 Trading assistants.

15.3 Structurers.

15.4 Sales.

15.5 Researchers.

15.6 Middle office (product control).

15.7 Back office (operations).

15.8 Quantitative analyst.

15.9 Information technology.

15.10 Legal.

15.11 Model validation.

15.12 Market risk control department.

15.13 Counterparty risk control department.

15.14 Finance.

15.15 Internal audit.

15.16 Compliance.

15.17 Trading manager.

15.18 Management.

15.19 Human risks.

15.20 Summary.

16 Developing Processes for New Products (and Improving Processes

for Existing Products).

16.1 What is a process?

16.2 The status quo.

16.3 How processes evolve.

16.4 Inventory of current systems.

16.5 Coping with change.

16.6 Improving the situation.

16.7 Inertia.

16.8 Summary.

17 New Products.

17.1 Origin of new products.

17.2 Trial basis.

17.3 New trade checklist.

17.4 New product evolution.

17.5 Risks.

17.6 Summary.

18 Systems.

18.1 What makes a good system?

18.2 IT procurement.

18.3 System stakeholders.

18.4 The IT team.

18.5 Timeline of a project.

18.6 Project management.

18.7 The IT divide.

18.8 Techniques and issues related to IT.

18.9 Systems architecture.

18.10 Different types of development.

18.11 Buy versus build.

18.12 Software vendors.

18.13 Performance.

18.14 Project estimation.

18.15 General thoughts on IT.

18.16 Summary.

19 Testing.

19.1 What is testing?

19.2 Why is testing important?

19.3 Who does testing?

19.4 When should testing be done?

19.5 What are the types of testing?

19.6 Fault logging.

19.7 Risks.

19.8 Summary.

20 Data.

20.1 Common characteristics.

20.2 Database.

20.3 Types of data.

20.4 Bid/offer spread.

20.5 Curves and surfaces.

20.6 Sets of market data.

20.7 Back testing.

20.8 How can data go wrong?

20.9 Typical data sources.

20.10 How to cope with corrections to data.

20.11 Data integrity.

20.12 The business risks of data.

20.13 Summary.

21 Reports.

21.1 Introduction.

21.2 What makes a good report?

21.3 Reporting requirements.

21.4 When things go wrong.

21.5 Redundancy.

21.6 Control.

21.7 Enhancement.

21.8 Security.

21.9 Risks.

21.10 Summary.

22 Calculation.

22.1 What does the calculation process actually do?

22.2 The calculation itself.

22.3 Sensitivity analysis.

22.4 Bootstrapping.

22.5 Calculation of dates.

22.6 Calibration to market.

22.7 Testing.

22.8 Integrating a model within a full system.

22.9 Risks associated with the valuation process.

22.10 Summary.

23 Mathematical Model and Systems Validation (Geoff Chaplin).

23.1 Testing procedures.

23.2 Implementation and documentation.

23.3 Summary.

24 Regulatory, Legal and Compliance.

24.1 Regulatory requirements.

24.2 Legal.

24.3 Compliance.

24.4 Risks.

24.5 Summary.

25 Business Continuity Planning.

25.1 What is business continuity planning?

25.2 Why is it important?

25.3 Types of disaster.

25.4 How does it work?

25.5 Risks associated with BCP.

25.6 Summary.

PART IV WHAT CAN GO WRONG, THE CREDIT CRISIS.

26 Credit Derivatives and the Crisis of 2007 (Robert Reoch).

26.1 Background.

26.2 The events of mid-2007.

26.3 Issues to be addressed.

26.4 Summary.

Appendix: Summary of Risks.

General comment – unforeseen risk.

Operational risk (in the trade lifecycle).

Human risks.

Market risk control.

Counterparty risk control.

Cashflow.

Data.

Reporting.

New products.

Legal and regulatory.

Testing.

Business continuity planning (BCP).

Valuation and model approval.

Management.

Documentation.

Front office.

Research.

IT and systems.

Effective control and support.

Recommended Reading.

Index.

　　Robert Baker has spent the majority of his working life in the

financial services industry. He has worked at major investment

banks such as Barclays Capital, ABN Amro, UBS Warburg, NatWest

Markets and Rabobank as well as the Hedge Fund Solent Capital. He

has developed risk management and valuation systems across most

asset classes, specializing in credit derivatives.

　　Holding positions as programmer, project manager, business

analyst and head of technology he has worked in IT, from office and

quantitative groups. Using his knowledge of software, financial

products and the way investment banks and hedge funds operate; he

has bee able to interface between all of the business functions to

ensure accurate gathering and delivery of system

requirements.

　　In recent years, Robert has moved into consultancy helping a

range of companies in the financial sector to maximize their use of

IT and advising software vendors on how to tailor their products to

meet client expectations.

　　Robert holds an MA in mathematics from the University of

Oxford.

　　The author can be contacted by email at robert.baker@elmcroft.net

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书籍介绍

Every person working in an investment bank or hedge fund has a large part of his work connected to the lifecycle of a trade. It is the glue by which all the departments are bound and the aggregated success or failure of each trade determines the survival and growth of the entire organization. Trading has evolved from a humble apple grower wanting a stable price for his produce come harvest time, to a complex and exciting industry comprising a significant share of the global economy, and more recently, taking a hand in saving it. It is the fundamental activity of investment banks, hedge funds, pension funds and many other financial companies. There is no better way to understanding the workings of a financial institution than to follow the progress of a trade through all of its various stages and all the activities performed upon it. In the aftermath of the financial crisis, the financial world has changed, with less emphasis on trading and entrepreneurial activity and more on risk management, regulation and auditing. In this new world order, there will be a much greater analysis of every trade, and all market participants will need to have a much better understanding of the impact of their work on the whole trade cycle. This book will dissect a trade into its component parts, track it from pre-conception to maturity and how the trade effects each business function of a financial institution. As well as illustrating each part of the trade process, it will highlight the legal, operational, liquidity, credit and market risks to which the trade is exposed. Readers will benefit from a full understanding of all parts of the trade process, including derivative and credit derivative trades, and will also see, with examples where appropriate, how the mismanagement of these risks led to today's financial crisis.