If you’re looking for trade life cycle interview questions, you’ve come to the right place. In this blog post, we’ll provide you with some questions that will help you prepare for your next interview. With these questions, you’ll be able to show your understanding of the trade life cycle and how it works.
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These are bespoke contracts, and 70% of them are interest rate derivatives, so could you please list any derivatives that are traded over the counter? Interest Rate Options (options on Interest Rate Futures), Credit Default Swaps (single name), FX Swaps (different currencies, remove exchange rate risk), Cross Currency Swaps (different currencies, remove interest rate risk and exchange rate risk), Interest Rate Forwards (FRA), Interest Rate Swaps (same currency, remove interest rate risk), and Interest Rate Forwards (FRA)
BPV stands for Basis Point Value, CCP for Central Counterparties, CUSIP for the Committee on Uniform Security Identification Procedures, DTD for Document Type Definition, ESMA for the European Securities and Markets Authority, FINRA for the Financial Industry Regulatory Authority, FIXML for Financial Information eXchange Markup Language, and FpML for Financial Products Markup Language, which is tailored for interest rate swaps and forward contracts.
7) Can you describe the various financial markets? Money Market: This is the borrowing and lending of money and credit over a short period of time. Maturities are under a year, and in the majority of nations, this is OTC. Cash Market (spot market) is for immediate settlement and consists of equities and bonds in the capital market, which is for medium- and long-term borrowing. Foreign Exchange Market – This is for all global currencies.
Can you list the various asset classes? Interest Rates: Government Bonds; Forward Rate Agreements; Interest Rate Futures; Swaps and Options; Credit: Corporate Bonds; Loans; Asset Swaps; Total Return Swaps; Credit Default Swaps; Equities: Stock Indices; Convertible Bonds; Foreign Exchange: FX Forwards; FX Swap; Cross Currency Swap; FX Future; Commodities: Base Metals; Precious Metals
Which of the following best describes the money market? They are all priced using the forward rate. Unsecured Cash – (Interbank Lending/Deposit Market) The interest rate is fixed for that time period, and the principal amount plus the interest is repaid at the maturity of the deposit. This market is primarily OTC. Typically, the time frames are O/N (overnight), T/N (tomorrow/next), and anything up to 12 months. LIBOR, EuriborSecured Cash: Treasury Bills, Certificates of Deposit, Repurchase Agreements
Explain what is “Over the Counter Market”?
A decentralized market without a physical location, the over-the-counter market allows participants to transact with one another via a variety of communication channels, including phone, email, and proprietary electronic trading systems.
Mention what are levels of traders?
The fund manager may simply be rushing to build a position when placing orders for the purchase or sale of a specific security, as was previously discussed. He may be managing multiple funds or portfolios. The fund managers may not have really had a fund in mind to allocate the shares to when they issued the orders. He/she places the order in order to increase profits and avoid unfavorable market conditions.
Risk management and order routing. We all know that the broker is responsible for settling trades, so if a client defaults on a trade, the broker is responsible for making up the difference to the clearing corporation. Orders accepted and sent to exchange are subject to a number of risk management checks conducted by institutions and retail customers. Although retail investors are subject to more risk management checks, the underlying assumption is that they are less creditworthy. Additionally, because of online trading, the client has become more anonymous, increasing the risk. For institutional investors, it differs because of their large balance sheets relative to the size of the orders they wish to place. They continue to hold collateral with the members with whom they conduct their trades. As a result, their trades undergo fewer risk management checks than those of retail clients.
Have you ever pondered what occurs when you start a trade, or, to put it simply, when you use your trading terminal to place an order to buy or sell shares of stock on the stock market?
The broker accepts this order for execution. The broker sends the institution the trade confirmations following successful execution. The institution’s fund manager decides during the day how many shares should be allocated to each fund, and by evening, sends this information to the broker. Brokers prepare the contract notes in the names of the funds in which the fund manager has requested allocation after performing a cross-check to ensure that all of the allocation details match the trade details.
A trade in the world of finance is the exchange of a security (stocks, bonds, commodities, currencies, derivatives, or any other valuable financial instrument) for “cash,” which is typically a short-term promise to pay in the currency of the nation where the “exchange” is located. The supply and demand for a particular financial instrument determine the price at which it is traded.
FAQ
What is the life cycle of a trade?
The fundamental activity of exchanges, investment banks, hedge funds, pension funds, and many other financial companies is the life cycle of a trade. The term “trade life cycle” refers to all of the operations that take place during a transaction, including order placement, trade execution, and settlement.
How do you prepare for a trade interview?
You should record yourself under the following circumstances to practice for these interviews: Queue up 4–5 randomized questions. Give yourself 30 seconds for each question to think of a response. And then give yourself 2-3 minutes to record an answer.
What is back office in trade life cycle?
Three crucial tasks are primarily carried out by the back office: clearing, settlement, and accounting. Significant operational tasks like record-keeping, order confirmations, trade settlement, and regulatory reporting are covered in this stage.
What are the two most important parts of trade life cycle in secondary market?
There are primarily two phases of the trade life cycle: trading activity Operational Activity.
