Repo Agreements Banks

In addition to using Repo as a financing vehicle, repo-traders are “marketplaceing.” These traders are traditionally known as “matched book repo resellers”. The concept of trading lost books closely follows that of a broker who perceives both parts of an active trade that, for the most part, has no market risk but has only a credit risk. Elementary book-match resellers engage in both repo and reverse repo in a short period of time and record the offer/question preededad gains between reverse repo and repo rates. Currently, credit book repo distributors use other profit strategies, such as non-compliant maturities. B, collateral swaps and liquidity management. This is the “eligible security profile” that allows the purchaser to take the risk of defining his appetite for risk with respect to the collateral he is willing to hold for his money. For example, a more reluctant pension buyer may only hold “current” government bonds as collateral. In the event of liquidation of the pension seller, the guarantee is highly liquid, so that the pension buyer can quickly sell the security. A less reluctant pensioner may be willing to take bonds or shares as collateral without investment degree bonds or shares, which may be less liquid and which, in the event of a pension seller`s default, may experience higher price volatility, making it more difficult for the pension buyer to sell the guarantees and recover his money.

Tripartite agents are able to offer sophisticated collateral filters that allow the repo buyer to create these “legitimate collateral profiles” capable of generating systemic collateral pools reflecting the buyer`s appetite for risk. [13] In addition, the over-the-counter repositories that are carried out through the Bloomberg information system with settlement, clearing and collateral management through the National Settlement Depository have the following characteristics: The revaluation of the securities is carried out for the entire portfolio of transactions of the counterparty of the Bank of Russia and not for each deal, the first discounts established by the Bank of Russia this morning being used. In some cases, the underlying security may lose its market value for the duration of the pension agreement. The buyer can ask the seller to finance a margin account on which the price difference is identified. The underlying guarantee for many repurchase transactions is in the form of government or corporate bonds. Equity exposures are simply deposits on shares such as common shares (or common shares). Some complications may arise due to the increased complexity of tax rules on dividends, unlike coupons. In a repo, the investor/lender provides cash to a borrower, the loan being secured by the borrower`s collateral, usually bonds. If the borrower becomes insolvent, the guarantee is granted to the investor/lender. Investors are generally financial enterprises such as money funds, while borrowers are non-intrusive financial institutions, such as investment banks and hedge funds.

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