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Product Control is a control and support function, responsible for ensuring accurate financial reporting for trading, lending and treasury desks. [ 1 ] [ 2 ] The function is an important risk management element within investment banking , and is also often employed by corporate treasuries , hedge funds , and more recently, crypto trading firms .
To address mismarking, in 2020 in the United States the Securities and Exchange Commission proposed a new rule, entitled "Good Faith Determinations of Fair Value," intended to address valuation practices and the role of a fund's board of directors with respect to the fair value of securities investments.
Product Control is primarily responsible for "explaining" the P&L; i.e.: attributing returns to individual desks, decomposing these into their risk factors, and ensuring that traders' positions are reflected at their market values; the tools here are often built by a separate quant team, possibly front office, but maintained by Product Control.
A trading turret or dealer board is a specialized telephony key system that is generally used by financial traders on their trading desks.Trading has progressed from floor trading through phone trading to electronic trading during the later half of the twentieth century with phone trading having dominated during the 1980s and 1990s.
In the course of trading and investing, Tier 1 investment banks generate counterparty EPE and ENE (expected positive/negative exposure). Whereas historically, this exposure was a concern of both the Front Office trading desk and Middle Office finance teams , increasingly CVA pricing and hedging is under the "ownership" of a centralized CVA desk .
When VaR is used for financial control or financial reporting it should incorporate elements of both. For example, if a trading desk is held to a VaR limit, that is both a risk-management rule for deciding what risks to allow today, and an input into the risk measurement computation of the desk's risk-adjusted return at the end of the reporting ...
Sales and trading is one of the primary front-office divisions of major investment banks. The term is typically reserved for the trading activities done by sell-side investment banks who are primarily engaged in making markets for institutional clients in various forms of securities. [ 1 ]
One famous rogue trader is Nick Leeson, whose losses on unauthorized investments in index futures contracts were sufficient to bankrupt his employer Barings Bank in 1995. . Through a combination of poor judgment on his part, increasingly large initial profits, lack of oversight by management, a naïve regulatory environment, and an unforeseen outside event, the Kobe earthquake, Leeson incurred ...