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What is Trade Life Cycle of Reconciliation?

Posted on by Imarticus Learning

Trade life cycle is a basic investment banking process covering all of the phases between origination and settlement of trades. Reconciliation also plays an essential role to provide accurate transactions, minimize risk, and uphold the integrity of the financial market. Knowledge regarding trade life cycle within investment banking assumes a prime function in serving people who would be interested to become a career specialist in investment banking because this would make managing tricky trade flow and differences really straightforward.

The rise in demand for reconciliation professionals has rendered investment banking courses like the Certified Investment Banking Operations Professional (CIBOP™) course priceless. The blog will include a detailed study of the trade life cycle, its major stages, and the contribution of reconciliation to the finance sector.

Understanding the Trade Life Cycle in Investment Banking

1. Trade Initiation

Trade initiation is the initial stage in the life of a trade, when there is a trade between a buyer and a seller. It is carried out through exchanges, electronic trading platforms, or OTC transactions. In this phase, information regarding the trade such as the asset type, amount, price, and counterparty details are documented. Proper documentation and correctness of information are of utmost importance in order to prevent discrepancies and errors at the latter part of a trade’s life cycle.

2. Trade Capture

The trade is captured in the financial institution’s front-office systems when it is finalized. This means capturing the trade details in electronic databases such that all the parameters are consistent with the agreement that the parties have reached. Automated systems are utilized on a day-to-day basis to prevent human errors and ensure the integrity of the transaction process.

3. Trade Validation

Validation ensures all trade information to be correct and in line with in-house process as well as regulatory standards. Discrepancies identified here are resolved prior to going forward further. Transparency and potential loss or risk of processing the wrong trade at a consequential loss of money or regulatory reprisal is ensured through a process like that.

4. Trade Enrichment

Trade enrichment is a trade enrichment procedure of enriching incomplete information like settlement instructions, fees, taxes, and currency conversion in a way that the trade is effectively executed. Counterparty confirmation, regulatory validation, and risk control are included in this procedure as well to maximize processing as well as reduce efficiency.

5. Trade Confirmation and Affirmation

Trade terms are agreed and confirmed between the two parties to the trade. This is typically on electronic platforms, with confirmation agreed prior to settlement. Automated confirmation systems enable real-time verification and avoidance of failure of trade. Affirmation also assists in avoidance of misunderstandings between parties and financial regulatory compliance.

6. Trade Settlement

Settlement is the execution of the transfer of the asset’s ownership and cash exchange between parties. T+1 and T+2 settlement cycles regulate the settlement rate after execution of trades. Delayed settlements can lead to financial charges, high counterparty risk, and operational inefficiencies. Effective settlement mechanisms ensure market stability and smooth financial transaction operations.

7. Trade Reconciliation

Reconciliation is the most significant phase of a trade’s life. Reconciliation checks trade accounts to be synonymous both inside and outside an organization in order to avoid error and inconsistency in finance. Comparison of custodian reports, statements, and booking trades for divergence are a part of reconciliation. Periodic audit and reconciliation tests identify fraudulent trades, buggy booking, and lost trades, and thus contribute to the financial market safety.

The Importance of Reconciliation in the Trade Life Cycle

Reconciliation verifies the trade records, controls risk to finances, and imposes regulatory requirements. A few of them are mentioned below:

  • Identification of Errors & Correction: It identifies the mismatches in the trade records and closes them on time.
  • Regulatory Compliance: Gives the financial institution the compliance responsibility by maintaining actual trades.
  • Operational Effectiveness: Eliminates human error and enhances the overall process flow.
  • Risk Reduction: Reduces financial loss due to misdirected reported trades.
  • Transparency & Accountability: Provides transparent audit trail of transactions and trades.
  • Fraud Prevention: Stops fraud and other abuse of trading activity.
  • Increased Investor Confidence: Enables transactions to be traceable and accurate, thus fostering confidence in financial institutions.

How an Investment Banking Course Can Help?

If you’re looking to build a successful career in investment banking, enrolling in a structured program like the Certified Investment Banking Operations Professional (CIBOP™) course can be a game-changer. This program offers:

  • 100% Job Assurance with salaries up to ₹9 LPA
  • 7 Guaranteed Interviews
  • 60% Salary Hike on average
  • Industry-Aligned Training covering securities operations, risk management, and AML
  • 1000+ Hiring Partners offering lucrative roles
  • Live and Classroom Training with flexible learning schedules
  • Real-life Case Studies and Practicum Exposure to complement learning
  • Industry-veteran Expert Faculty
  • Soft Skills and Resume Building Sessions to enhance employability

FAQs

What is investment banking trade life cycle?

Trade life cycle entails several stages of a trade processing from beginning to settlement in order to ensure and regulate.

Why is trade reconciliation important?

Reconciliation provides accurate records of trade, avoids financial risk, and promotes institutions’ regulatory adherence.

What are the skills employed in trade reconciliation?

Experts need to have good analytical abilities, attention to detail, knowledge of financial markets, and experience in reconciliation software.

How long is the trade life cycle process?

Settlement cycles differ, generally following T+1 or T+2 processes, depending on asset type and regulation.

What are the career prospects after completing an investment banking course?

Graduates can be recruited as trade analysts, risk managers, operation specialists, and reconciliation specialists in top financial institutions.

What is the remuneration package for trade reconciliation professionals?

Recruits can be given approximately ₹4-6 LPA, while experienced professionals can be given up to ₹9-12 LPA.

How do I register for an investment banking course?

You can enroll with the CIBOP™ program at Imarticus Learning and acquire skills to be successful in investment banking.

How does reconciliation minimize financial risks?

Reconciliation reduces differences in trade records to minimize the risk of error, fraud, and financial misstatement.

Conclusion

It is absolutely necessary that an individual who would like to get into the career of investment banking must know about trade life cycle and reconciliation process. As markets become more sophisticated, knowledge about trade operations and reconciliation is very much in demand. Organizations are keenly looking for individuals with the ability to provide precision, regulatory compliance, and speed of trade operations.

With investment banking training in a program such as CIBOP™, you will be well equipped with the finance skills that will land you a high-paying job in leading financial institutions. With formal education, hands-on experience, and employment guarantee, CIBOP™ training gives you the perfect set of skills to address the demands of the financial marketplace.

If you want to enter the exciting world of finance, then now is the time to begin your career. Invest in the appropriate knowledge, build your skills, and begin on the path to a successful investment banking career today!

Trade Life Cycle – The Process of Buying & Selling

Posted on by Imarticus Learning

Understanding the trade life cycle helps one get a foothold in exploring finance, especially investment banking. This blog will unfold the mystery of the trade cycle and break down each stage initiation of a trade to settling- and its importance against the broader backdrop of the trade in the stock market process. We will also cover how stock trading works, the process of trade execution, and the relevance of investment banking courses in mastering these concepts.

What is the Trade Life Cycle?

The entire cycle of events that constitute the steps involved in a trade, right from its initiation to its settlement, is known as the Trade Life Cycle. In this cycle, various steps are involved so that an exact record of the transaction takes place, followed by proper processing and settlement. Any individual who deals in trading stocks needs to be well aware of the trade life cycle for transparency, efficiency, and security in the financial markets.

Key Stages of the Trade Life Cycle

  • Trade Initiation

The trade life cycle is initiated by the decision of an investor to buy or sell a financial instrument. Usually, this decision is influenced by some market analysis, investment goals, and risk tolerance.

  • Stock trading process

The investor orders through a broker or trading platform at this stage. This could be a market order that executes at the existing market price or a limit order that executes at an existing specified price.

  • Trade Execution

After the order, it is taken into the trade execution process. In this process, the real buying or selling takes place.

How stock trading works

The order is matched with a counterparty in the market, either on an exchange or over-the-counter (OTC). Executing a trade involves complex algorithms and high-frequency trading systems that ensure quick and accurate matching.

  • Trade Confirmation

After execution, both parties receive a trade confirmation detailing the specifics of the transaction, including price, quantity, and time.

  • Trade execution process

Both parties will agree on the terms of the trade from this confirmation, hence decreasing their chances of disputes.

  • Clearing and Settlement

Clearing steps include computing obligations both from the buyer and the seller’s side. This helps determine the correct securities and funds exchanged. Settlement is the last stage, where the actual transfer of securities and funds is done. In most markets, this is done two business days after the trade date, which is T+2.

  • Investment banking courses

In most investment banking courses, clearing and settlement are discussed in great detail, and students learn how timely and accurate processing can prevent settlement failures. Discover our comprehensive program to kickstart your journey in the investment banking industry.

  • Custody and Reporting

After the settlement, the securities are kept in the custody of the custodian bank or the custodian brokerage firm. Reports come out regularly to help one account for the holdings and determine the ownership.

  • Trade life cycle

It is vital to keep records accurate and ensure compliance with regulatory requirements.

How Important is the Trade Life Cycle in Stock Trading

The trade life cycle is crucial to the efficient operation of financial markets. It ensures that trades are executed efficiently and settled accurately, thus maintaining market integrity. For those interested in how stock trading works, a good understanding of the trade life cycle is indispensable. Investment banking courses have modules explaining the trade life cycle in detail as it is extremely relevant to a lot of other financial roles. It helps professional people understand and get the experience of trading stocks and the skills required to master the complexities associated with trade execution.

For a more comprehensive understanding on trade life cycle check out this video. 

Better Knowledge through Investment Banking Courses

For individuals aspiring to excel in finance, investment banking courses offer in-depth knowledge of the trade life cycle and related processes. These courses cover everything from trade initiation to settlement, providing a robust understanding of how stock trading works.

Investment banking courses teach the theoretical aspect of the trade life cycle while offering practical insights through case studies and real-world scenarios. The courses help you gain expertise in the stock trading process, master the trade execution process, and understand the nuances of the financial markets.

FAQs

  1. What is a Trade Life Cycle?

The Trade Life Cycle consists of the different stages through which a trade passes from initiation into a settlement. They involve an interplay of trade execution, confirmation, clearing, settlement, custody, and reporting.

  1. How do stock trades function?

Stock trade involves making an order in a trading account through a brokerage firm or trading site; it entails the execution of matching with the counterparty in a clearing environment followed by confirming the trade and its settlement obligations.

  1. Why is the trade execution process important?

The trade execution process is significant because it ensures that the trades are matched correctly and executed in time, thus reducing the chances of errors and enhancing market efficiency.

  1. Why should I consider taking investment banking courses? 

Investment banking courses will provide you with thorough knowledge of the financial markets-the trade life cycle-and get you equipped with the capabilities needed to perform well in financial roles.

  1. How can I learn more about the trade life cycle? 

You can get to know the life cycle of a trade in great detail by attending specialized courses on investment banking, where all aspects of trading are discussed, and real-life case studies are provided for practical understanding.

Conclusion

The life cycle of a trade is thus important to everyone associated with the financial market. From the beginning of a trade to the very end, the stages are integral in ensuring the smooth functioning of stock trading. Knowing how stock trading works and the trade execution processes of the trade makes all the difference in the efficacy of your trade.

Investment banking courses cover a complete education in these subjects, hence making investment banking programs extremely valuable for any aspiring finance professional. Being well-versed in a trade life cycle gives you an edge as you would master dealing with the complexities of financial markets with ease.

What Are Some Good Questions to Ask an Investment Banker

Posted on by Imarticus Learning

Investment banking is one of the most lucrative career options. People who are eager to pursue a career in this field are often very curious about the day-to-day roles and responsibilities of an investment banker. The job has been popular ever since the capital markets started flourishing; the high pay and perks attract a lot of young people who try hard to make a successful career in this domain.

Your journey gets a little easier if you have someone to lead the way. This is true in professional aspects as well. The big question that people have in mind before opting for the investment banking industry is what is the best course of action to become an investment banker & how exactly to become an investment banker. Think about the job role & figure what are the best questions to ask an investment banker.

The best advice would come from someone who is already living your dream of becoming an investment banker. The investment industry is very dynamic and is evolving with the hour. There are a lot of grey areas that are not addressed in books and courses and require a more pragmatic approach to learning about the subject.

What questions to ask an investment banker?

What questions to ask an investment banker and what will be a good question vary greatly. It depends significantly on your motive behind starting the conversation and what you are looking to gain from it. You need to set your objective straight, whether you are looking to get a job or whether you are using the connection to build your network and make a connection.

The second important factor to keep in mind before considering questions to ask an investment banker is what stage of your career you are in. Are you a college student who wants to pursue higher education and then join the industry? Are you a working professional who is looking to switch to this industry, or do you just want to upgrade your skills and land a job as an investment banker? While asking your question, you should try to be as specific as possible and tailor it according to your requirements, any information that could be found online is probably not the best one to enquire about.

Here is a list of some interesting questions to ask an investment banker:

What type of investment banker are they?

When it comes to the important questions to ask an investment banker, this is one of the most important ones. Here is the answer-

In the investment banking industry, bankers are categorized into two groups: product group and industry. Some of the mainstream product groups include Initial Public Offerings (IPOs), Mergers and Acquisitions (M&A), Corporate restructuring, etc.

How to build and maintain long-term professional relationships with clients?

Working as an investment banker requires more than just industry knowledge and financial know-how. Your soft skills are equally important as your hard skills, and having good interpersonal skills is key to surviving within this industry.

What would you do differently to reach your present level?

If you are a beginner who is looking to learn from other’s mistakes, this question will certainly help you in your endeavors. It will help you to build the perfect road map for your dream job and will also help you avoid some common mistakes made by people in this industry.

What will be the impact of Artificial Intelligence in the Investment Banking Industry? There are talks of Robot Advisors, how will this impact growth and career prospects in the field?

AI has transformed various industries and has also helped automate many repetitive tasks that earlier required the human workforce. In the digital age, everything is run on data, and AI-powered Machine Learning techniques have already adapted human intelligence in some regards. There are driverless cars being made with the help of this technology, which might have a severe impact on the investment industry as well.

Why was your motivation behind choosing a career in this field?

This question would be fruitful if you want to know the investment banker on a more personal note and you want to listen to his inspiration and his point of view on the investment banking industry. It can help you develop a fresh perspective as to why you should join this industry.

What are some key skills that you look for in a candidate at your organization?

This question will help you understand the hard and soft skills needed to have a successful career in the industry. If you are interested in joining the particular organization, it will be very informative and insightful to crack the interview.

The above are the most important questions to ask an investment banker. Make sure that you confirm all the required details with them once you get some time with them. It’ll not only enhance your own knowledge but also prepare you for your potential future in this stream. 

A dedicated investment banking course can provide a valuable advantage for those looking to break into the field of investment banking. These courses equip you with the technical skills and financial modeling expertise that investment banks look for in candidates. They can also offer networking opportunities and help you better understand the industry culture. If you’re serious about launching your investment banking career, a course can be a strategic investment in your future.

What Is Trade Life Cycle Of Reconciliation?

Posted on by Imarticus Learning

Before understanding the trade life cycle of reconciliation, let’s study the term: reconciliation.

Reconciliation

Reconciliation is basically a process in which an accountant compares two separate records and evaluates the accuracy of the agreement. It is a verification method to ensure that the process of trading is correct, secure and consistent in practice.

The process of reconciliation is done in order to protect businesses from fraud and illegal activities in trade. The frequency of reconciliation depends on the body with regular check frequencies of daily, once in a month or in a year.

Now, we are in a position to understand the trade life cycle of reconciliation.

Trade Life Cycle

The life cycle of reconciliation

In most institutions, the process of reconciliation is machine-oriented, thereby automated. But the process still requires humans to double-check the accuracy of the document and look for errors. Reconciliation consists of the following steps, let’s understand them one by one:

1. Checking the cash register with the bank statement

The first step of reconciliation is to compare and check the transaction in the cash register to that of the bank statement. 

2. Finding missing transactions in the bank statement, and matching it with that of the cash register

There are instances when a transaction is not recorded in the bank statement, but it is present in the cash register. The role of an accountant here is to find the missing transaction and fix it in the records.

3. Ensuring transactions are recorded in both bank statement as well as company internal register

As an accountant, it is important to record every transaction of the company in a two-medium form. One in the cash register, and second in the internal cash register. This helps in making the process of accounting and reconciliation easier.

4. Check for bank errors

Sometimes there can be printing or technical errors in bank statements which can lead to major differences in transactions in the bank statements and cash register. So it is important to identify the errors, fix them and produce new adjusted bank statements. The accountant can add, subtract or modify the bank statement to match with the cash register in case of a printing error or technical error. The purpose of the process is to make it transparent and secure for the company.

Banking and Finance

5. Balancing the bank statement and internal cash records

The reason why reconciliation is done is to ensure that the bank statement matches with internal cash records and vice versa. The accountant must identify, correct and modify the errors in any of the maintenance records ( bank statements and internal cash records) in order to depict the good financial health of the company.

There are two ways to check records, one is with the help of double-accounting which we have discussed above. The second is to use analytics to identify major fraudulent activities in the financial system and report them.

If you’re too new finance and banking industry and are looking forward to learning Capital Market, bonds, equities, and investment banking, then we highly recommend having a look at our courses in finance at Imarticus Learning. It will help you in understanding the fundamentals of finance and know about how economies work.

For more such articles, feel free to explore more by, 

https://imarticus.org/trade-life-cycle

A Quick Way to Solve a Problem with Trade Capture in Trade Life Cycle

Posted on by Imarticus Learning

In the economic market, “Trade Capture” means booking / capturing the trade into the structure used within the financial organization. At times, this may arise multiple times based on the intricacy of the trades and the capacity of the systems to be able to capture the economic, non-economic, and static details depending on the deal.
The rewarding trade capture within a trading system occurs when the trade facts are sent to the back office instantly, through an interface for operational processing. Most of the time, the trade details are recorded manually by the traders, when an STO (Securities Trading Organisation) does not have a trading system. This requires either collection by or distribution to the middle office or settlement department for operational processing. In such conditions, the traders are required to manage their trading positions manually, keeping it trendy with any latest trades.
The entire steps from the stage of order receipt and trade execution to the trade settlement are known as the “Trade Cycle”. This can be categorized into various stages as listed below.
Front Office
The front office, commonly referred to as the Trading Floor, performs two main function –

  • Trade Capture

The trade gets initiated in the front office using the trading app, in accordance with the retail price of the instrument. Still, the buyer will have an opportunity to cite an offer to the selling party. The trade gets executed, only if the counterparty agrees to the trade details and is willing to enter the deal. Once the trade gets executed, it gets captured using a Trade Capture system, which gives the go-ahead to all the necessary trade information and assigns a trade confirmation number or a trade reference number. This number is unique and used for all the upcoming trade events such as amendments, cancellation and so on. This unique number indicates the booking confirmation and is sent to both sellers and buyers as an acknowledgment.
Middle Office
The Middle Office plays a very important part of the exception management. At this stage, three important steps are accomplished such as –

  • Validation
  • Booking
  • Confirmation

By using the Order Management System (OMS), the tradesman works on the deal and the trade gets enhanced by the static data such as the Standard Settlement Instructions (SSI), Custodian Details, City Holidays, Special Instructions and so on. These static data details are vital for the execution and settlement of the trade. The allocation of the trade happens in the Middle Office, gets published in the Back Office, and finally considered live and operational.

Back Office
The Back office is considered the “backbone” of the entire trade life cycle. It mainly performs three vital functions such as –

  • Clearing
  • Settlement
  • Accounting

This stage covers the significant operational activities such as record keeping, order confirmations, trade settlement, and regulatory reporting. Most of the time, the back office tasks are deployed to low-priced sources for its specific management activities, with a view to reducing the company costs, thus increasing their productivity by delivering better operational value.
The next activity soon after the trade execution is to capture the entire trade details, regardless of the base it is recorded without any hindrances. The trade which is executed initially is captured in the front office where the primary details of each Asset Management in trade are being recorded.

Conclusion
The complete Trade Life Cycle is a jumble of complex functions where the trade undergoes a stream of several events. There is a lot of manual involvement in all these events and this increments the time spent for processing and settlement of various functions.

 

Trade Life Cycle – The Process of Buying And Selling!

Posted on by Imarticus Learning

What is trade?

Trade is the process of buying and selling any financial instrument.

The lifecycle of a trade is the fundamental activity of investment banks, hedge funds, pension funds, and many other financial companies. There is no better way to understand the workings of a financial institution than to follow the progress of a trade through all of its various stages and all the activities performed upon it. In the financial market, “trade” means to buy and/or sell securities/financial products. 

 

To explain it further, a trade is the conversion of an order placed on the exchange which results in pay-in and pay-out of funds and securities. The trade ends with the settlement of the order placed.

All the steps involved in a trade, from the point of order receipt and trade execution through to settlement of the trade, are commonly referred to as the ‘trade lifecycle’.

Trading has evolved from a humble apple grower wanting a stable price for his produce come harvest time, to a complex and exciting industry comprising a significant share of the global economy, and more recently, taking a hand in saving it. 

It is the fundamental activity of investment banks, hedge funds, pension funds, and many other financial companies. There is no better way to understand the workings of a financial institution than to follow the progress of a trade through all of its various stages and all the activities performed upon it.

Just like any other product, even trade has its life cycle involving several steps, as those with a career in Capital Markets know.

All the steps involved in a trade, from the point of pre-negotiations and trade execution through to settlement of the trade, are commonly referred to as the trade life cycle. The Trade life cycle consists of a series of logical stages and steps.

What are the Steps Involved in a Trade Life Cycle?

1. Sale

  • This is a process of client acquisition in which HNIs or Institutional clients are introduced to various investment products or vehicles.
  • These vehicles or products are available with an Investment Manager or Bank by whom the client’s investments are managed.
  • The investments are collectively called Mutual or Hedge funds.


2. Trade Initiation and Execution

  • This is the process of placing an order in the market.
  • Trade Initiation and Execution can be done both in Order and Quote-driven markets.
  • This depends on the choice of a marketplace and the external platform.
  • Once the order is placed and it gets matched, the trade is said to be executed.


3. Trade Capture

  • Trades are then booked internally in an FO system for it to flow down to the operating systems.
  • It is booked in a Risk Management System (RMS)


4. Trade Validation and Enrichment

The reference data team set up the static and dynamic details which help middle office teams to validate the trade, before releasing instructions into the market.


5. Trade Confirmation 

  • This is an extremely critical step for the trade settlement.
  • Trade details and SSIs are agreed with the counterparty at bachelor schreiben lassen least a day before the settlement date.
  • Confirmation via depositories like Euro clear/DTCC


6. Trade Settlement 

This is the process of simultaneous exchange of cash versus securities for a security trade or cash versus cash for a Derivatives trade.


7. Reconciliation 

Reconciliation involves matching ledgers against statements to ensure correct accounting of all trade books.

The beauty of Investment Banking Operations, as taught in any school of investment banking, is the trade life cycle and its mechanisms akademisches ghostwriting.  It has always fascinated me to think how innovative and creative a financial institution can work to get a job done.
Whilst working through the life cycle, one must keep in mind the reason for its existence, the end result and the factors that surround it.

Steps Involved in a Trade Life Cycle

Pointers to remember:

  • The reason the market and its participants trade securities and financial instruments hausarbeit schnell schreiben, the current drivers and trends in modern securities markets.
  • The methods the trades are executed, that any financial analyst course can teach you.
  • It is very important for an organization to identify, describe and create a clear picture of the events scheduled for a trade.
  • The operations team needs to be familiar with the key terms used in the fields of trade processing and its administration
  • Understand the interaction and dependability of each department through which the trade flows.
  • Understand the role of IT, identify the gaps which IT can resolve especially Straight Through Processing techniques
  • Most importantly, what can go wrong where and what are the risks involved in every step of the trade life cycle ghostwriter bachelorarbeit kosten, be it credit, market, liquidity or operational risk.

The main reasons for the failure of a trade life cycle could be due to controls not adhered to or failure by any department of any of the people involved in the trade life cycle.


If you are looking for a Capital Markets course, or want to explore an Investment Banking Career, get to know more about the trade lifecycle through focused training and this blog could be a good starting point ghostwriting preise.

To know more about this, you can also visit – Imarticus Learning  Also can contact us through the Live Chat Support system or can even visit one of our training centers based in – Mumbai, Thane, Pune, Chennai, Bangalore, Hyderabad, Delhi, and Gurgaon.

Beginner In Trading In Derivatives Markets?

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Beginner In Trading In Derivatives Markets?

What are derivatives?

Derivatives are financial assets that are linked to an underlying stock, bond, currency, exchange rate, commodities, or market indices. Their value is derived from the underlying asset to which they are linked. Before you start trading in derivatives, you must understand what they are, what the risks associated with them are, and the mechanics of trading in them.

Derivatives prices normally move in the direction of the underlying security or financial instrument to which it is linked. For instance, if it is an equity-linked instrument, then it will move in the direction of the equity share. Derivatives have gearing.

This means that their price movements will be multiplied exponentially in either direction. That is why we are required to trade derivatives cautiously. If you want to develop an investment banking career for yourself, doing an investment banking course that specializes in derivative markets with Imarticus learning Pvt Ltd. is the guaranteed path to success.

Types of derivative securities

The types of derivative securities are given below:

  • Futures

This is a contract between two parties to buy or sell a particular asset at a pre-determined price at a future date. This represents an obligation on the part of the two parties to settle the contract. The oldest form of a derivative contract is the futures contract. Future contracts are linked to stock indices, interest rates, and commodities including oil and gold. Futures contracts are settled either by delivery of the physical commodity or by the payment of the difference. 

  • Options

In contrast to a future, an option only gives a choice or opportunity to the buyer to settle or not settle the contract. If the buyer does not exercise the option, the option expires worthless. Options are either bullish bets or bearish bets on the price direction of the underlying commodity. When you buy a call option, you pay a small premium to obtain the right to get a large exposure to the underlying stock. 

As your capital outlay, when you purchase a relatively small call option, options are said to have leverage. Leverage or gearing in options means there is a high risk of volatility or violent fluctuations in prices. When you sell a put option, you protect your capital losses from price levels below the strike of the put option. Options have both time value and intrinsic value. As options approach maturity, the time value of the option expires.

  • Swaps and Forward contracts

These contracts exist in currency markets and are usually used to hedge currency risk, especially by import-export companies. They are also sometimes used for speculative purposes to profit from interest rate and exchange rate movements. Future contracts are over-the-counter contracts, and in swap contracts, one type of cash flow is swapped for another. Swap contracts are used to exchange currency exchange rate risk and also default risk on a cash flow or a loan or cash flows from business transactions.

  • Commodity futures

This is one of the largest futures markets and is linked to metals, oil, and agricultural commodities.

What are derivative contracts used for?

Hedging: Derivative contracts are used to protect from adverse movements in the security markets and commodity markets. You already hold positions in the underlying instrument. To hedge against the risk, you take opposite positions in the derivatives market. Violent fluctuations in the physical securities market are canceled out by opposite movements in the derivative market so that the portfolio impact is minimized.

If you have a large stock portfolio, this can be hedged by selling the underlying index futures or options in the derivatives market. Bear in mind that the stock portfolio should mirror the stock index components as much as possible. Only then this strategy would be useful.  

Speculation: When options and futures are traded without any exposure to the underlying physical instrument, it becomes a speculative trade. Due to the innate leverage present in options, the potential for violent fluctuations and large losses exists.

Leverage: To capitalize on the opportunity to leverage a small amount of capital to get a big payoff.

Advantages and disadvantages of derivatives

Derivatives can help to hedge portfolio risks, lock in prices of contracts and mitigate risks. On the flip side, derivatives have the potential to create large losses due to their gearing and are exposed to counterparty and interest rate risk.

Key takeaways 

If you are a beginner in derivatives trading, make sure that you trade derivatives cautiously after you develop a complete understanding of the instruments. You should prudently step into the derivative markets after you do an investment banking course. Understanding derivatives will also help you in having an investment banking career. The first step in this direction is completing the investment banking course.

Visit Imarticus Learning Pvt Ltd. to understand all about learning to use derivatives. Our Investment banking courses are structured to meet your learning requirements. Contact us through chat support, or drive to our training centers in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, and Gurgaon.  

What to Know About Cryptocurrency?

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With everything becoming dependent on technology, why not money? Monetary transactions have slowly gone digital too. With this form of digitalization, cryptocurrency was also developed which evolved into a medium of exchange.

Bitcoin became the first cryptocurrency that began back in 2009. Now, businesses are looking towards this exchange medium, with the likes of Elon Musk investing $1.5 billion in Bitcoin. Hence, it would be wise to know what cryptocurrency is and why it has already taken the world by storm.

What is cryptocurrency?

The meaning of cryptocurrency lies in its name itself. It is a kind of digital currency that is encrypted for security purposes. As it is encrypted, it becomes impossible to counterfeit like real money or even hack virtually. It comes in the form of digital coins and tokens that one can buy with real money.

Or, if someone has the expertise in technology, they can ‘mine’ it for themselves via a strong graphics processing unit (GPU).

CryptocurrencyMost of the cryptocurrencies use Blockchain technology, which is decentralized and records transactions among computers. Cryptocurrencies are mainly used for trade finance. People usually use it to buy goods and services for many beneficial reasons.

Different types of cryptocurrencies

Bitcoin is the most popular among all cryptocurrencies and currently, there are at least 18.5 million tokens being used. Besides Bitcoin, there are more than 6,700 kinds of cryptocurrencies being used in the market nowadays. And, some of them are:

Ethereum: Ethereum uses a token named Ether and it mainly promotes free access. But mostly, it is for developers to get rid of middlemen and control their apps.

Litecoin: Litecoin was created in the light of Bitcoin to improve upon it. It is basically the same as Bitcoin other than faster time for transactions and a few more benefits.

Stellar: Stellar’s currency is Lumen and its uniqueness lies in people being able to transact between different countries. Also, huge transactions can be made with little to no hassle.

How to buy cryptocurrencies?

If someone wants to buy some cryptocurrencies for themselves, they will need an app where they can hold the currency like a ‘wallet’. Then, they can create an account and transfer real money to buy cryptocurrencies. Some online brokers are also selling cryptocurrencies. Notably, the exchange rate for cryptocurrencies can fluctuate at any time due to its decentralized nature.

BitcoinFurther, cryptocurrencies are very much transparent. They have zero possibility of being stolen. The transactions can also be quicker and made with minimal transaction fees compared to banks or other financial organizations, which makes trade finance a much easier process.

By and large, cryptocurrencies are a little risky but as online transactions are increasing day by day, their importance is increasing too. One should only go along with purchasing cryptocurrencies with their advantages and risks all in mind.

Want to Master Trade Life Cycle? A CIBOP Certification Can Help!

Posted on by Imarticus Learning

Want to Master Trade Life Cycle? A CIBOP Certification Can Help!

It is a critical aspect of trade and commerce. It refers to the process from the moment a product reaches its final destination and is used by consumers. If you want to master this complex process, then CIBOP certification can help you achieve your goal.

CIBOP stands for Chartered Institute of Business Operations Professionals. It provides training courses with various difficulty levels depending on your professional background, goals, interests, and beginner or advanced level diplomas, making you an expert in the field.

What is the Trade Life Cycle?

To better understand what the trade life cycle can do for you. In simple terms, it refers to all the stages involved in making a product, from study and design to production, marketing, and sales, distribution, use by consumers until its final disposal. It’s a complex process made of several simple steps, each with its functions and duties to be taken care of by both the business owner and all employees involved.

Why should I get certified as a CIBOP professional?

CIBOP is a certification designed by IBCPB to test and certify professionals in IB operations, such as financial analysts.

If you desire to expand your knowledge about how global markets function, if you want to broaden your horizons as well as complement your salary, then CIBOP certification may be the answer.

Why is Trade Life Cycle the most crucial aspect in business operations?

Business operations are all about creating and managing efficient processes so that everything runs smoothly. For this purpose, you need to study various aspects such as market trends, competitor analysis, labor force planning, client requests, transportation, distribution, profit margins, and others.

Other advantages of CIBOP certification: 

* Designing processes for your business operations that lead to better results

* Understanding how global markets work and increasing your chances on the job market

* Improving your performance at work and increasing your opportunities for promotion

* Attracting potential clients with a positive image of your company

* Showing customers what makes you different from the competition

CIBOP certification is an opportunity available to anyone who wants to enhance their skills to achieve better results. Why don’t you see it as a chance to improve your current job performance and increase your potential for promotion?

Learn Investment Banking with Imarticus Learning

Students can learn about complicated securities and derivatives, their trade-lifecycles, and the services that make up investment banking operations. Students of Imarticus Learning can work at most global investment banks with the CIBOP certificate, which the London Stock Exchange recognizes.

Some course USP:

  • This Investment Banking certification aids the students to learn job-relevant skills that prepare them for an exciting career.
  • Impress employers & showcase skills with a certification endorsed by India’s most prestigious academic collaborations.
  • World-Class Academic Professors to learn from through live online sessions and discussions. It will help students understand the 360-degree practical learning implementation with assignments.

Common Capital Market Instruments That Are Profitable in 2021

Posted on by Imarticus Learning

Capital markets are used by individuals and businesses to trade securities and debt. Unlike the money market, a capital market deals in buying and selling long-term debt. Investment bankers have deep knowledge about the capital market to help their clients in raising capital. Several capital market entities can be traded for generating capital.

Businesses hire expert investment bankers for knowing the best capital market instrument to invest in. If the right capital market entities are traded at the right time, it can generate revenue for long-term business goals. Read on to know the top capital market instruments that are profitable in 2021.

Equities 

Equity refers to the portion of ownership that is to be traded. Selling equities to someone makes them a shareholder of the organization. An equity holder may not receive regular payments from the organization but can still generate income by selling the stocks.

When the share of an organization goes high, shareholders can exit the company by selling their stocks. Shareholders will also earn a commission from the profits made by the organization. In 2021, you can give ownership of a company to several shareholders to generate capital.

Bonds

Bonds are a type of debt securities that are issued by the government, companies, and municipalities. The bond issuer collects debt for a fixed period from investors and shareholders. Once the fixed period ends, the bond issuer has to repay the principal amount. Bonds can help companies in collecting quick revenue as investors prefer to give debt for a fixed period.

 Debentures

Debentures are also a type of debt securities that do not include any collateral. The trade of debentures is done based on mutual trust as there is no collateral. Investors that are buying debentures from an issuing company also act as creditors of the company.

Derivatives 

capital market courses in IndiaUnderlying assets are used to find the value of financial instruments. Such instruments are called derivatives. The underlying asset that is used to calculate the value of derivatives can be bonds, stocks, or currency.

There are four types of derivatives that are forward, future, options, and interest rate swap. To know more about the four types of derivatives, you can go for capital market courses in India.

Exchange-traded funds 

Many investors come together to create a pool of financial resources. Those resources are then used to buy capital market entities like shares, bonds, and derivatives. Exchange-traded funds are traded in the stock market and have features of both shares and mutual funds. Investors who have limited knowledge about the capital market can benefit from exchange-traded funds.

 Foreign exchange entities 

 You can trade several capital market entities that are represented on a foreign market. Currency agreements and derivates are the common types of foreign exchange entities used by companies in 2021.

How to learn more about the capital market? 

You can go for banking and finance online courses that follow an industry-oriented approach. Imarticus Learning is a well-known EdTech platform that can provide new-age investment banking courses.

The Certified Investment Banking Operations Professional course provided by Imarticus will cover many concepts of the capital market. It will offer tech-enabled learning to keep track of your course.

The investment banking course comes with a placement assurance and, you can kickstart your career in the industry. At the end of the online course, you will receive a certification from the London Stock Exchange which is globally recognized.

trade life cycleConclusion 

Businesses need capital market experts to generate revenue for long-term business objectives. With an online course, you can learn about the trade life cycle in the capital market and can earn a lucrative job offer. Start learning more about capital market instruments today!