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The Trade Lifecycle: Behind the Scenes of the Trading Process | by Robert Baker | 2010 | ISBN: 9780470685914. Business Trading Ebook.

July 20th, 2011 | by kutenk |

The Trade Lifecycle: Behind the Scenes of the Trading Process
by Robert Baker
2010 (314 pages)
ISBN:9780470685914
Highlighting the legal, operational, liquidity, credit and market risks to which the trade is exposed, this book dissects a trade into its component parts, tracks it from pre-conception to maturity and explains how the trade affects each business function of a financial institution.
The Trade Lifecycle—Behind the Scenes of the Trading Process
Preface
OVERVIEW
WHY THIS BOOK?

Part I – 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
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

Chapter 3 – Asset Classes
OVERVIEW
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

Chapter 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

Chapter 5 – Credit Derivatives
OVERVIEW
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

Chapter 6 – Liquidity, Price and Leverage
6.1: LIQUIDITY
6.2: PRICE
6.3: LEVERAGE

Part II – The Trade Lifecycle
Chapter 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

Chapter 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

Chapter 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

Chapter 10 – Risk Management
OVERVIEW
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

Chapter 11 – Market Risk Control
OVERVIEW
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

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
OVERVIEW
13.1: BALANCE SHEET
13.2: PROFIT AND LOSS ACCOUNT
13.3: FINANCIAL REPORTS FOR HEDGE FUNDS AND ASSET MANAGERS

Chapter 14 – P&L Attribution
OVERVIEW
14.1: BENEFITS
14.2: THE PROCESS
14.3: EXAMPLE
14.4: SUMMARY

Part III – Systems and Procedures
Chapter 15 – People
OVERVIEW
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

Chapter 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

Chapter 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

Chapter 18 – Systems
OVERVIEW
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

Chapter 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

Chapter 20 – Data
OVERVIEW
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

Chapter 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

Chapter 22 – Calculation
OVERVIEW
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

Chapter 23 – Mathematical Model and Systems Validation
23.1: TESTING PROCEDURES
23.2: IMPLEMENTATION AND DOCUMENTATION
23.3: SUMMARY

Chapter 24 – Regulatory, Legal and Compliance
24.1: REGULATORY REQUIREMENTS
24.2: LEGAL
24.3: COMPLIANCE
24.4: RISKS
24.5: SUMMARY

Chapter 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
Chapter 26 – Credit Derivatives and the Crisis of 2007
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