I am trying to understand how repo traders are being measured(pnl/risk). I understand the amount of repo that can be done is limited by regulation but want to dig deeper on how the performance is measured.
For long term repo of 1 week to 3 months, I understand there is market risk and pnl. What instruments would the trader use to hedge the risk?
For overnight repo for 1 day, where is the market risk? The repo rate changes duration the day and how can trader manage this risk. How will the funding be charged to the repo desk?
Thanks a ton, Fish