Читать книгу The Trade Lifecycle - Baker Robert P. - Страница 16

Once a trade has been executed, there will be at least one exchange of cash or assets at some future time ranging from within a few hours or days for spot trades, to many years for trades such as swaps, to unlimited periods for perpetual bonds. (Assets here include cash.)

Apart from exchanging cash or assets, the trade itself has value while it is still live. So all processes and risk analysis must work with both the cash or asset exchanges and the intrinsic trade.

The buyer and seller are holding different sides of the same trade. Although at execution the price they agreed was the same for both, the value of each side of the trade may vary over time.

Here is an example that shows how a trade has two independent sides that result in intrinsic value and exchange of cash.

On 11th January X buys a future contract from Y in EUR/JPY where he will in six months pay one million EUR and receive 137.88 million JPY (that is a 6m future at 137.88).

On 11th April, the three-month future price is 140. X holds but Y buys a three-month future from Z.

On 11th July, both futures settle.

X pays EUR 1m and receives JPY 137.88m

Y receives EUR 1m from X, pays JPY 137.88m to X

Y pays EUR 1m to Z and receives JPY 140m from Z

Z receives EUR 1m and pays JPY 140m

So instead of Y buying a new trade (the three-month future), he could simply have sold his side of the original (six-month future) trade with X to Z. The fair price of the sale would be the amount of yen that would result in a value of JPY 2.12 million (140 – 137.88) on 11th July.

We see that through the life of a trade it has past, current and future cash or asset exchanges and it has intrinsic value. Concomitant with these exchanges come their associated risks and processes.

In financial terms, a trade converts potential to actual profit and loss with every exchange of cash or assets.