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Critical Analysis of the Departments - Essay Example

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Critical Analysis of the Departments

It is a general and accepted notion in financial market that propriety trading is much riskier than non-propriety trading as it results in more volatile trading. Financial analyst believes that firms and investment banks usually leave the financial market in ambiguity when it comes to their quantum of propriety trading and non-propriety trading. TPG believes that it has competitive advantage over other players in the market that is way it has its major investment in propriety trading. Certain percentage of revenue, but comparatively lower, is generated from non-propriety trading which is also referred to as the flow trading. In financial terms, the flow trading is conducted by the firm on behalf of the client funds and the firm’s revenue is the commission earned on this trading. The company has been focusing on its flow trading business as well as it is likely to generate more client information which thus supports propriety trading eventually. The trading department of TPG works in close collaboration with Quantitative Analysis and Sales department which provides the relevant logistic support to the trading department. ...
In addition to that, the department is also actively involved in the pricing of derivatives and hedging. This function involves an intricate software development and thus the expertise of the IT department is always required to be at the disposal of the Quantitative Analytics department. The derivative pricing involves advanced numerical techniques and stochastic calculus. The department is also actively involved in risk management which involves both systematic and non-systematic risk. The process usually involves a great deal of time series analysis and back testing. Last but not the least; the department also evaluates the credit analysis. Credit analysis basically involves assessing how much the company is levered which in financial terms would interpret as the debt equity ratio of the company. When the debt to equity ratio of the company exceeds a certain percentage, then the department proactively informs the higher management of the company about the situation and alarming them to reduce the leverage of the company. Most importantly, the department works for the development of the trading strategy of the firm. Sales The sales department is another crucial department when it comes to the business strategy of the company. The sales department is responsible for approaching the client and maintaining their information. This department acts as the back bone of the organization and is responsible for setting up the web-site through which the trading with the corporate and non-corporate clients is conducted. This department will require a considerable number of highly skilled and dedicated staff who is able to understand the technical need ...Show more

Summary

Critical Analysis of the departments Trading Trading is the most significant source of the revenue for the company. The department is mainly divided into two main sub business which is propriety trading and execution of trade on behalf of the client. Propriety trading has been the primary source of generating revenue when it comes to investment banks all around the world…
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Critical Analysis of the Departments essay example
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