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Codes of FinanceEngineering Derivatives in a Global Bank$
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Vincent Antonin Lépinay

Print publication date: 2011

Print ISBN-13: 9780691151502

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691151502.001.0001

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Hedging and Speculating with Portfolios

Hedging and Speculating with Portfolios

Chapter:
(p.55) Chapter 2 Hedging and Speculating with Portfolios
Source:
Codes of Finance
Author(s):

Vincent Antonin Lépinay

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691151502.003.0004

This chapter presents a detailed description of the management of the traders' huge portfolios. Traders of capital guarantee products (CGPs) sit at the intersection of several exchanges. This delicate position owes much to the design of the products they manage: CGPs involve complex combinations of underlying securities that traders are not expert in but must still buy and sell. The chapter introduces a crucial actor in the trading room: the pricer—a computational machine that provides traders with the market values of their contracts. In a market in which products are designed to create asymmetry between the bank and its clients or other competing banks, pricers that provide traders with values and risks produce the only knowledge available.

Keywords:   traders, portfolios, CGPs, pricer, market values, banks, trading room

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