Wiley Finance: The Trade Lifecycle

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The lifecycle of a trade is central to the operations of investment banks, hedge funds, pension funds, and various financial institutions. Understanding the trade process reveals the inner workings of these entities. This guide explores the trade lifecycle, its inherent risks, and weaknesses, dissecting a trade from inception to maturity while examining its impact on each business function. It highlights legal, operational, liquidity, credit, and market risks associated with trades. Readers will gain insight into the entire trade process, including derivatives and credit derivatives, and see examples of how mismanagement of these risks contributed to the recent financial crisis. The content is organized into four parts. The first part addresses trading products and risks, covering asset classes, derivatives, and liquidity. The second part delves into the trade lifecycle, discussing cash flows, risk management, and accounting. The third part focuses on systems and procedures, including personnel, product development, regulatory issues, and business continuity planning. Lastly, the fourth part examines potential pitfalls, particularly regarding credit derivatives and the financial crisis. In the wake of the crisis, there is a heightened emphasis on transparency and due diligence, necessitating a thorough understanding of the entire trade cycle. This guide serves as a comprehensive resource for navigating the complexities of tra