Dealing Room & Global Markets Overview

A comprehensive set of flashcards covering key concepts related to the dealing room, global markets, and financial instruments as discussed in the lecture.

Dealing Room

The part of the bank where trading, investments, and client financial transactions take place.

Liquidity

The ease with which a bank can access cash to meet obligations and settle trades.

Hedging

Taking action today to protect against a possible loss tomorrow, typically by locking in prices or reducing uncertainty.

Exchange Rate Risk

The risk that currency rates change and cause losses, especially in transactions involving different currencies.

Interest Rate Risk

The risk that interest rates change and affect the bank's income or costs associated with loans, deposits, and bonds.

Global Markets

The business unit that manages all dealing room activities, including serving clients and managing financial risks.

Front Office

Part of the dealing room where money is made and includes dealers, traders, and salespeople who trade and communicate with clients.

Middle Office

Responsible for monitoring risks, checking trades, and measuring profit & loss; often considered the risk management side of the dealing room.

Back Office

The part of the bank where settlement happens, including confirming trades and ensuring payments are processed.

Sales Desk

The client-facing side of Global Markets that connects clients with trading solutions and products.

Trading Desk

Where the bank faces the financial markets, executing trades and managing the bank's financial positions.

Risk Management Desk

Ensures that the bank does not lose too much money by monitoring risk limits and controlling potential losses.

Derivative

A financial contract whose value depends on an underlying asset, used primarily for hedging purposes.

Fixed Income

Investments where money is lent in exchange for regular interest payments and the return of principal at maturity.

FX Spot

Currency exchange agreement for immediate delivery at the current market rate.

FX Forward

Agreement to lock in a currency exchange rate for future delivery to protect against rate changes.

FX Swap

A transaction that involves exchanging currencies now and reversing the exchange at a later date.

Interest Rate Swap (IRS)

Agreement to exchange fixed interest rate payments for floating rate payments to manage interest rate exposure.

Option

A contract that gives the purchaser the right but not the obligation to buy or sell an asset at a predetermined price.

Total Return Swap (TRS)

An exchange of the total return on an asset for fixed or floating cash flows without selling the asset.

Treasury Bills (T-Bills)

Short-term government debt securities that pay back at maturity with interest.

Treasury Bonds (T-Bonds)

Longer-term government debt instruments that pay fixed interest over a specified term.