Capital Markets : Front to Back Office - Behind the scenes

Equities explain ownership through shares and dividends; founders finance with savings or loans, banks lend to profitable firms, and IPOs move companies from private to public markets via roadshows.

Explore the secondary stock market, including organized exchanges like NYSE and Nasdaq, over-the-counter trading, market makers, bid-ask spreads, and liquidity considerations in pre-market and extended sessions.

Explore treasury bills as short-term debt securities issued by the U.S. Treasury, priced at a discount, backed by government guarantees, with maturities from a few days to one year.

Explore how repurchase agreements use treasury bonds as collateral to provide short-term liquidity, with a 7-day term, 2% annualized rate, and a final repurchase at a higher price.

Learn how bonds are issued, priced, and traded, covering issuer and investor roles, primary and secondary markets, and fixed, variable, zero coupon, high yield, convertible bonds, and yields.

Explore how a bond purchased between coupon dates affects accrued interest and cash flows from semiannual coupons, with the last and next coupon payment dates and a two-investor example.

Learn bond pricing by calculating present value from discounted semiannual coupons and par value at maturity, using face value, coupon rate, yield to maturity, credit quality, and time to maturity.

Explore how yield to maturity measures a bond's total return by discounting future coupons and principal, using a $1,000 par value, $950 price, 4% coupon, and five-year horizon.

Explore the foreign exchange market, including central banks' roles, RTGS liquidity, ISO currency codes, and bid–ask quote pairs that identify euro, US dollar, and yen exchange rates.

Examine direct quotes and cross rates in the foreign exchange market, calculate euro yen from US dollar quotes, and review bid, ask, inverted quotes, pip, and business day rules.

Explore how a foreign exchange spot transaction delivers immediate cash at the current market rate, with a fixed rate and two-business-day settlement.

Examine foreign exchange forward transactions, where parties lock a three-month forward outright rate using forward points added to the spot rate, with bid and ask, leading to settlement at maturity.

Explore foreign exchange swaps, pairing a spot transaction with a firm forward in opposite directions. Use a one-year example with spot and forward rates to illustrate pricing and execution.

Explore how options work, including strike price, expiration, and contract multiplier; distinguish call and put options, intrinsic and extrinsic value, and in-the-money, at-the-money, and out-of-the-money scenarios, using the options chain.

Explore how interest rate swaps, an over-the-counter contract exchanging fixed vs variable cash flows on a notional, use LIBOR and fixed and floating legs to manage costs and rate risk.

Learn how to price interest rate swaps by valuing the fixed and floating legs through zero coupon and forward rates, using a four-year example and cash-flow timelines.

Bootstrap zero coupon rates from bond cash flows and isolate ZC1 through ZC4 to discount payments, preparing for forward rates in the next lesson.

Explore pricing an interest rate swap using zero coupon and forward rates, deriving forward rates from zero coupon rates and applying them to swap valuation.

Learn how to construct a four-year interest rate swap schedule by pricing fixed and floating legs with zero coupon and forward rates, computing discounted cash flows, and assessing swap value.

Explains a currency swap enabling Skytech Drones Inc. to borrow euros by swapping $150 million for €100 million, with fixed-rate euro and dollar payments to reduce currency risk.

Credit default swaps insure against a reference entity's default; the buyer pays a 2% spread for five years for a $30 million payout on a credit event.

Meet the sales person, the client liaison on the trading floor who bridges clients and traders, informs on financial products, and negotiates prices for large transactions.

Coordinate with traders to quote bids and offers for large Apple stock orders, distinguishing indicative versus firm prices, and navigating a two-way market amid competition.

Learn how traders and salespeople balance customer needs and bank profits. Examine bid-ask spreads and fairness challenges through examples like Apple stock.

Provide bid and ask prices as a market maker by synthesizing interbank market data, electronic trading systems, and client insights to gauge liquidity and volatility.

A trader acts as a market maker for Apple stock by quoting the bid and ask, setting margins for a 300 million size, hedging, and monitoring volatility and volume.

Explore proprietary trading versus market making on a bank trading floor, highlighting risk limits, capital allocation, and front running controls. Understand how desks are separated by a Chinese wall.

The trading floor structurer designs tailored structured products by coordinating four parties: funding, options trader, and retail sales, and blends a zero coupon bond with a binary option.

Explore the middle office's role in supporting front office transactions by ensuring correct booking, enforcing counterparty and trader limits, and reconciling confirmations and discrepancies to maintain accurate valuations and reports.

Explore limit controls managed by the middle office, including counterparty and trader limits, continuous real-time monitoring, anomaly detection, automated controls, and ongoing reviews with real-world risk examples.

Explore how the back office ensures trading operations through settlement and clearing, regulatory compliance with MiFID II, pre accounting, and external and internal reconciliation across front, middle, and back offices.

Analyze back office clearing and settlement of a Tesla trade, showing how MT 541 and MT 543 must match for RVP and DVP to settle through the clearinghouse.

Analyze back office pre accounting for securities, comparing trading (fair value) and held to maturity (weighted average cost), with unrealized and realized gains across portfolios.