لایب سان

Author(s): Robert P. Baker

Series: The Wiley Finance Series

Publisher: Wiley, Year: 2015

ISBN: 1118999460,9781118999462

The Trade Lifecycle For other titles in the Wiley Finance series please see www.wiley.com/finance The Trade Lifecycle Behind the Scenes of the Trading Process Second Edition ROBERT P. BAKER This edition first published 2015 © 2015 John Wiley & Sons, Ltd First edition published 2010 by John Wiley & Sons, Ltd. Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please visit our website at www.wiley.com. The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Library of Congress Cataloging-in-Publication Data Baker, Robert P., The trade lifecycle behind the scenes of the trading process / Robert P. Baker.—Second edition. pages cm.—(Wiley finance series) Includes bibliographical references and index. ISBN 978-1-118-99946-2 (cloth) 1. Commodity exchanges. 2. Commercial products. 3. Risk. I. Title. HG6046.B323 2015 332.64—dc23 2015017868 A catalogue record for this book is available from the British Library. ISBN 978-1-118-99946-2 (hbk) ISBN 978-1-119-00357-1 (ebk) ISBN 978-1-119-00368-7 (ebk) ISBN 978-1-119-01439-3 (ebk) Cover design: Wiley Cover Images: Top image Compass & Map © DNY59/iStockphoto; Bottom image Compass © Alexandr Tovstenko/iStockphoto; Background image © badmanproduction/iStockphoto Set in 11/13pt Times by Aptara Inc., New Delhi, India Printed in Great Britain by TJ International Ltd, Padstow, Cornwall, UK To the memory of my dear mother Contents Foreword from the First Edition xvii Foreword to the Second Edition xix Preface xxi Acknowledgements xxiii About the Author xxv PART ONE Products and the Background to Trading CHAPTER 1 Trading 3 1.1 How and why do people trade? 3 1.2 Factors affecting trade 3 1.3 Market participants 4 1.4 Means by which trades are transacted 5 1.5 When is a trade live? 7 1.6 Consequences of trading 7 1.7 Trading in the financial services industry 8 1.8 What do we mean by a trade? 10 1.9 Who works on the trade and when? 11 1.10 Summary 12 CHAPTER 2 Risk 13 2.1 The concept of risk 13 2.2 Risk is inevitable 13 2.3 Quantifying risk 14 2.4 Methods of dealing with risk 15 vii viii CONTENTS 2.5 Managing risk 15 2.6 Problems of unforeseen risk 16 2.7 Summary 16 CHAPTER 3 Understanding Traded Products – Follow the Money 17 3.1 Spot trades 18 3.2 Future (forward) 20 3.3 Loan 21 3.4 Deposit 23 3.5 Swap 23 3.6 Foreign exchange swap 25 3.7 Equity spot 26 3.8 Bond spot 27 3.9 Option 27 3.10 Credit default swap 30 3.11 Summary 31 CHAPTER 4 Asset Classes 33 4.1 Interest rates 33 4.2 Foreign exchange (Forex or FX) 40 4.3 Equity 44 4.4 Bonds and credit 46 4.5 Commodities 53 4.6 Trading across asset classes 58 4.7 Summary 59 CHAPTER 5 Derivatives, Structures and Hybrids 61 5.1 Linear 61 5.2 Nonlinear 62 5.3 Some option terminology 66 5.4 Option valuation 67 5.5 Exotic options 67 5.6 Structures and hybrids 69 5.7 Importance of simpler products 70 5.8 Trade matrix 71 5.9 Summary 72 CHAPTER 6 Liquidity, Price and Leverage 73 6.1 Liquidity 73 6.2 Price 75 Contents ix 6.3 Leverage 76 6.4 Summary 79 PART TWO The Trade Lifecycle CHAPTER 7 Anatomy of a Trade 83 7.1 The underlying 83 7.2 General 83 7.3 Economic 84 7.4 Sales 84 7.5 Legal 84 7.6 Booking 85 7.7 Counterparty 85 7.8 Timeline 86 7.9 Summary 87 CHAPTER 8 Trade Lifecycle 89 8.1 Pre execution 89 8.2 Execution and booking 91 8.3 Confirmation 94 8.4 Post booking 96 8.5 Settlement 97 8.6 What happens overnight 101 8.7 Changes during lifetime 105 8.8 Reporting during lifetime 110 8.9 Exercise 110 8.10 Maturity 112 8.11 Example trade 113 8.12 Summary 115 CHAPTER 9 Cashflows and Asset Holdings 117 9.1 Holdings 119 9.2 Value of holding 120 9.3 Reconciliation 121 9.4 Consolidated reporting 122 9.5 Realised and unrealised P&L 122 9.6 Diversification 122 9.7 Bank within a bank 123

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