The Trade Lifecycle: Behind the Scenes of the Trading Process by Robert P. Baker
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.