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How is repo rate risk hedged? And is repo rate dv01 the usual greek for this?

i am talking about repo risk in a derivative on a bond

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  • $\begingroup$ I assume you are talking about overnight repo (not term repo); you could hedge it with OIS swaps. $\endgroup$ – noob2 Oct 25 '16 at 20:16
  • $\begingroup$ well the forward bond price depends on term repo... and i think term repo may easily have a low correlation with o/n repo... $\endgroup$ – Randor Oct 26 '16 at 6:50
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    $\begingroup$ and i think that ois can be a fair first guess of repo, but, i am sure it can easily move quite differently $\endgroup$ – Randor Oct 26 '16 at 6:52
  • $\begingroup$ It seemed to me if you have locked in a term repo then you are fully financed until completion of the deal and have no interest rate risk. $\endgroup$ – noob2 Oct 26 '16 at 12:03
  • $\begingroup$ @noob2 yes i agree , you do a term repo to hedge the forward price (and implied repo rate). after all a repo deal is a forward minus spot. $\endgroup$ – Randor Oct 26 '16 at 12:19
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Repo risk is not always perfectly linked to OIS rates, although highly correlated. Therefore in large markets (say US) get a different repo curve as GC-OIS spread risk is material. This has led to repo rate futures: http://www.marketswiki.com/wiki/GCF_Repo_Index_futures http://www.dtcc.com/charts/dtcc-gcf-repo-index Would also note that repo rates from Tresury/MBS/Agency will differ and therefore have different contracts and risk buckets.

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