Overview

A modelled position must also be possible to trade, fund and maintain. This topic follows share borrowing, margin transfers, market roles and venue choice. You will learn which cash flows and constraints a price-only calculation leaves out. That helps distinguish an attractive paper trade from an executable position.

By the end of this note you should be able to:

• trace every cash flow in an equity short sale and name its non-price risks;
• distinguish futures margin, a repo haircut and derivative collateral;
• separate a participant's institutional role from its trading motive;
• compare exchange trading with bilateral and centrally cleared OTC trading.

1. Contents
2. The big picture