capital markets testing - calypso
TRANSCRIPT
Workshop hosted by Time2test Limited in conjunction with Asymilate Limited
1www.time2test.co.uk – Time2test Limited © 2013, 2012
Agenda
What's the agenda?
Flexible agenda to met the delegates’ requirements.
Evening times:
6pm – 10am ( 4 hours with coffee breaks)
Weekend and weekday times:
Start at 9am to 5pm with breaks and lunch
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House Rules!
Lavatories
Food and Drink in the class room
Drinks – water from the kitchen area
Fire Alarm
Room Access during lunch and breaks
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Pre-requisites • Your laptop and permissions to install software
• Windows machine for installation of the client software , ftp clients and other useful tools
• Pen and notepad for taking notes
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3 mins
Fast Paced course?
Lots to go through
We only have a limited time so the pace is going to be fast
The workshop will introduce you to the Capital markets domain from the Quality assurance and testing perspective.
We will introduce you to Asymilate’s Capital Markets Testing tool : Caesar
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About me – Mitesh SoniOver 20 years in the Capital Markets
Banking Domain
Has worked for major investment banks as a principal consultant
Specialises in Capital Markets Quality assurance and Testing solutions.
Managing Director of Asymilate Limited
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About me! – Viresh DoshiOver 15 years testing experience
Extensively worked in the Internet domain
Technical testing specialist
Process Improvements Advocate
Automation testing advocate
Keen follower of Agile and it’s techniques
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What do you want to get out of the course? Note down your goals and objectives one per sticky
note and describe them.
Note down any questions you have that you would like answered.
One per sticky note
Lets review them at the end of the course.
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10 mins
What do you already know about the capital markets domain? Lets talk and note down what we already know.
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5 mins
Capital Markets Testing overview The workshop will be delivered in a classroom lecture
style.
We will use a popular Capital Markets Application to describe the domain and concepts for testing and QA
We will also refer back to Caesar application which is a test harness built to perform regression testing for Capital Markets.
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Course Overview The 2 day Capital Markets Testing workshop is split into three categories:
1. Banking Domain
2. Technical Skills
3. Testing skills
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Course Overview – Banking Domain Capital Markets - what is
capital markets in the investment banking arena?
Learn about investment banking trading
Learn the different banking products (ADR
1. Equities2. Repos3. Swaps4. Bonds5. Derivatives
Learn the workflow - Trade, Transfer, Message
Learn about SWIFT messages
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Learn STP – straight through processing
Risk and Reporting - EOD Learn about these
objects(trades, transfers, messages, tasks, legal entities, tasks, legal entities)
Learn about static data Learn about netting Learn about SDI Learn about rejected trades
and resolution Learn about Front office,
Middle office and Back office
Course Overview – Technical SkillsUnix and linux for running jobs and
viewing log files and starting and stopping
Telnet and FTP for test data manipulation
XML files manipulation
Basic of SQL for test data preparation
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Course Overview – Testing SkillsPopular test variations for Test data Prep
Functional testing and Regression testing test plans and test cases creation
Performance Testing planning and simulation
Test Environments and development environment.
Problems and Defect finding and resolution
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RecapIntroductions complete
Objectives set on the sticky notes
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Quick recap of topics covered in the first session
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FX exampleFX – Foreign Exchange
Trade Lifecycle – Pricing to Accounting
Front office
Back office
Middle office
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ProductsSecurities- Bonds, Equities
Derivatives
Money Markets
FX
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Areas coveredDomestic Banking
Investment Banking – Capital Markets
Trading and Speculation
Hedging
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Chocolate – Cadburys ExampleChocolate is made in the UK
Raw material – Coco Beans are needed from South America
Instead of buying chocolate at a fluctuating price, Cadburys will enter into the derivatives market for a product that will fix the price for additional fee(s).
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Nick Leeson – Barings ExampleInvestment bank is brought down
due to a rogue trader who confirmed his own trades.
Large futures trades sensitive to changes in price of underlying asset led to big losses
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Quality GatesFour Eyes Principle – supervisory
checks to maintain audit trail
Kyc – Know your customer
Dodd Frank – OTC markets being forced to go through regulated exchanges to prevent big losses.
Basel committee recommendations
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Lehman Brothers exampleInvestment bank collapses.
Credit Defaults triggered large payouts that the bank could not guarantee
Counterparties exposed to Leemanstriggering systemic risk
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TopicsSettlement t+2 for FX (exceptions
CAD)
CLS – continuous link settlement –organisation that facilitates FX settlement and reduces settlement risk
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TopicsQuantitive easing – effects on exchange
ratesStatic Data – reference data Reuters/Bloomberg for pricingSWIFT – confirmations gateway MT/MXTrading book – hierarchy of trade
activityNetting – aggregate settlementMatching Confirmations Process
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TerminologyNostro – our account, at our agent
Vostro – cpty’s account with agent
Loro – cpty’s account held with our organisation who is an agent
STP – Straight Through Processing
Netting – an agreement to aggregate the transactions for net settlement
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QuizWhat is the difference between Front
Office and Back office?How would you describe Middle Office?What products are traded in Capital
Markets?What typical attributes make up a SWIFT
message?What is benefit of netting?What are Chinese walls at Investment
banks?
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QuizWhat does it mean to Settle a trade?What is a confirmation?What is a counterparty?Can you give some examples of static
data?What is STP?What in terms of financial reporting is
the main difference between a derivative and an equity?
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Quick recap of topics covered in the session
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Trade LifecycleHappy Day workflow scenario
Rainy Day scenario
Counterparty becomes insolvent
Incorrect Static Data propagation
Rate tolerances breached
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Many considerations for Test Scenarios
Cashflow and security movementAll transactions have movement of
cash and / or security
Cashflows are basic building block for valuation purposes
Discounted Cashflows used to compute net present value
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Delivery ConceptsDeliver Against Payment (DAP) –
Security and cash exchanged simultaneously
Delivery Free of Payment (DFP) –Security and Cash are exchanged independently (carries more risk)
Contingent accounting – used to build up general ledger to represent the trade as it is confirmed and settled
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Bond Example Bonds entitle buyer to interest payments
according to the bond definition Bonds are issued by governments and
corporations to raised debt ISIN – unique number to identify the Bond Coupon – term to denote the interest payable Value of the bond is inversely proportional to
interest rates. Yield curves are used to create net present value
computations
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IRS – Interest Rate swapTwo parties in a transaction where
one party pays fixed rate of interest and the other pays floating rate.
Used by companies to hedge against interest rate movements
Or to raise capital by companies who are lower credit grade clients
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OTC – over the counterOTC – over the counter products allow
the counterparties to agree flexible terms and conditions
Exchange traded – product conditions are determined by the exchange
CCP – Central Counter Party – Rapidly becoming the new infrastructure for settlement.
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Forward Products
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Forwards are products where the price and conditions are agreed today for a future settlement
Used for hedging purposes to avoid fluctuations of rates and prices
Also can be used speculatively for trading purposes
Repo ProductsRepurchase Agreements –
Agreements where on counterparty lends the other a sum of money which is backed by collateral from the other counterparty
Used frequently for Short Term financing by large investment banks
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Buy/Sell Back ProductsRepurchase Agreements
Short Term financing
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Option BasicsThe right but not the obligation to
buy or sell an asset at a given strike price and date schedule.
European – one fixed exercise date
American – can be exercised on any date to expiry
Bermuden – a schedule of expiry dates
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Terminology Arbitrage – small differences in rates that allow
you to simultaneously buy and sell an asset to capitalise on the rate difference.
Short selling –selling an asset even though you may not own the asset by taking a speculative view on where the market is heading.
Novation – transfer of ownership
LIBOR – Committee that sets the interest rates
ISDA agreement – legal framework for trade confirmation and settlement
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TerminologyEquity option – put / call
Exercised options - American , Bermudian, European
Swaption – the option to exchange fixed for floating in a swap trade
Asset swap – exchange the income stream from an asset pool to a cash income stream
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Goals and Objectives review and what’s next?
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Goals and Objectives Review the Sticky
notes
Did the course meet your goals and objectives?
Feedback will be requested via email.
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Recommend us?
Recommend your friends and earn some incentives:
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