How the Trading Floor Really Works
, by Duhon, Terri
- ISBN: 9781119962953 | 1119962951
- Cover: Hardcover
- Copyright: 10/22/2012
Is the trading floor really the Wild West? Do they have a purpose or are they relics of the past in the brave new world of finance post-crisis? Why isn't all financial trading done on an exchange? Trading floors have always fascinated people, but few understand the role they play in the world of finance today. We watch financial markets every day and generally focus simply on whether markets go up or down. For some market participants this is sufficient, but most would benefit from more color. Unfortunately the drivers of these moves are rarely explored in the standard media. The dynamics of the trading floor are a little microcosm of the global markets. Understand these dynamics and better understand the dynamics of global financial markets. Who are the key players on the trading floor and what are their roles and responsibilities? Who are the clients and do they really need the services the trading floor provides? How does the client understand their risk and know when the price is right? How does all this impact global financial markets? Trading floors also determine how risk decisions are made and how risk gets managed in a major financial institution. This is crucial to understanding the health of the financial system globally. "Where is the risk?" and "How is it managed?" seem to be the questions most often asked about finance institutions. Interestingly, a better understanding of how the trading floor works, and the questions will generally turn into "What is the risk?" and "How is it measured?" Part of the challenge of understanding the trading floor is wading through the terminology. Bid-offer, market-maker, upfront, hedging, real money, going short, counterparty credit risk, liquidity etc at least are real words. But V@R, IRS, repo, ROC, CDS, PV, TVM, CVA etc aren't. This creates a language barrier that is overwhelming for most. This book will decipher and translate the world of trading both cash and derivative products. Last of all, if you've ever wanted to know "who is the smartest person on the trading floor", "why you are only as good as your last trade", or "what risk is never considered but always there", this is the book to read.
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