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The Handbook of Fixed Income Securities, Eighth Edition, 8th Edition by Steven V. Mann, Frank J. Fabozzi

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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 ...

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