CHAPTERFIFTY-EIGHTFINANCING POSITIONS IN THE BOND MARKET
FRANK J. FABOZZI, PH.D., CFA, CPA
Professor of FinanceEDHEC Business School
STEVEN V. MANN, PH.D.
Professor of FinanceMoore School of BusinessUniversity of South Carolina
Leveraging strategies require that an investor borrow funds. There are several well-established arrangements in the bond market for borrowing funds. The most common practice is to use the securities as collateral for a loan. In such instances, the transaction is referred to as a collateralized loan. In this chapter we will look at the four types of collateralized loans in which the collateral is a bond: repurchase agreement, dollar roll, securities lending, and margin buying.
A collateralized loan is not the only mechanism ...