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

  • $\begingroup$ 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
  • 1
    $\begingroup$ 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

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.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.