Mastering Financial Calculations: A step-by-step guide to the mathematics of financial market instruments, Second edition

Chapter 6. Repos, Buy/Sell-backs and Securities Lending

“Although the legal benefit of the collateral passes from seller to buyer for the period of the repo, the economic benefit remains with the seller.”

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Introduction

Classic repo

Margin calls

General collateral (GC) and specials

Other features

Buy/Sell-back

Close-out and repricing

Securities lending

Comparison between the different transactions

Uses of repo and securities lending

Exercises

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Introduction

“Repo” is short for “sale and repurchase agreement” and is essentially a transaction whereby the two parties involved agree to do two deals as a package. The first deal is a purchase or sale of something – usually a government bond or other security – for delivery straight ...