Questions tagged [repo]
The repo tag has no usage guidance.
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Question about 'reversing in' in repo markets [closed]
In Stigum's money market book, in the chapter on repo, he talks about 'reversing in a security'. Then later on he quotes a portfolio manager sayin 'I reverse out securities to dealers, but I never ...
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Implied repo rate and slope of the yield curve
In page 34 of "Treasury Bond Basis" (Third Edition) by Burghardt et al, it says:
If the yield curve has a positive slope, carry for someone who is long bonds and short futures is positive. ...
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Balance Sheet Value of a Repo
I am relatively new to repos and I am trying to find out whether there is a standard practice for calculating balance sheet value of a repo. Are there any regulations that prescribe how banks shall ...
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How do you model share repurchase agreement?
If I understand correctly a share repurchase is when a public company decides to re-acquire its own shares. Let's say it does that with a deadline (expiry). This would mean that if there is some ...
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Forward Equity Curve Computation
I have been thinking about how forward equity prices are usually computed.
For the purpose of simplicity, let us take a share paying deterministic discrete dividends $(D_i)$ at times $(T_i)$ with a ...
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Reverse Repo and Yield to maturity
there is one question I got wrong that I am confused about and that is the following :
If you believe that yield will increase in the future which of the following should you choose?
the two ...
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3
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1
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565
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Is repo-ing out a bond the same as shorting the bond?
In fixed income, or in any other products for that matter, borrowing an asset is essentially shorting the asset. As a result, you would see hard-to-borrow names where the borrow rates are much higher ...
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Cash flow of stock lending transaction
I cannot find the mechanics of a stock lending transaction, even though it is a very basic operation.
I cannot see how the interest is paid at maturity.
Example:
I borrow 1 unity of stock $S$ at $T_0$,...
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Repo P&L - How to calculate
Total newbie here, I am struggling to calculate the correct repo PL on a transaction.
Basically I have a GBP Bond which I repo out as below:
UKT 2.75 09/24 (EK1093963)
so (41,395,983) @ 103.57 and I ...
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How does Repo enable zero cost leverage?
There have been numerous headlines the past two years where we learn that quant funds are engaging in algorithmic basis trades (aka relative value trades) between Spot Treasuries and Treasury Futures, ...
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Why did the month-end (ir)regularities in Effective Federal Funds Rate (EFFR) disappear in 2018?
The Federal Funds rate has exhibited regular drops at month ends since beginning of 2015.
(Source: FRED https://fred.stlouisfed.org/series/EFFR)
Some studies (e.g., https://www.mdpi.com/1911-8074/14/...
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When I borrow a bond, do I pay owner the coupons?
Or do I get to keep them for the duration of the repo transaction?
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483
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Why are T-bills yielding lower than the reverse repo rate?
With another US debt ceiling debacle looming, I just realized something that runs against my intuition:
Many of the Treasury bills maturing in 6 months (with the exception of the ones maturing near ...
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2
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298
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Why are MMFs willing to lend at 0% through reverse repo?
The reverse repo (RRP) rate is at/near zero lately, but RRP usage is still quite high. Why are people (money market funds?) willing to lend at 0% in the repo market?
Is it because of regulatory ...
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Carry and Pull to Par of a bond
I am of the understanding the true carry of a bond is yield - repo rate. And not simply coupon + repo cost because this doesn’t ...
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Can both good buying and good selling cause a bond to go special on repo?
A bond is known to go special when its repo rate gets particularly low relative to the GC (General Collateral) repo rate.
In my mind, this can be caused by two scenarios:
1. Institutional interest to ...
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China carry trade, borrow in the repo market and invest in govies
"Excess funds in the banking system had juiced leverage in financial markets by driving China’s overnight repo rate to a record low of 0.59% in December. The cheap short-term financing enabled ...
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Funding foreign asset purchase with repo
https://www.bis.org/publ/qtrpdf/r_qt1709e.pdf
extract from page 38
An investor wants to buy a foreign currency security with domestic
cash but does not wish to run FX risk. Then, three transactions ...
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1
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207
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Swap Spread Arbitrage & Rates/STIRT Vol
Concerning the classic swap spread arbitrage trade where you (as far as I understand it):
Buy a treasury and borrow in GC repo, paying repo rate and funding the haircut in short term unsecured ...
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1
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136
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Operational aspects of repo funding trades
It is widely known that repurchase agreements ("repos") are regularly used by market participants as a mean to fund long/short positions in a certain asset, in particular for derivative ...
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Negative Carry when Yield Curve is Downward Sloping
I am currently reading "The Treasury Bond Basis", and have a question regarding negative carry. The book states that the carry of a vanilla treasury bond will be negative when the yield ...
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Repo sensitivity
Hope u're all doing well in this sanitary crisis.
I have a question concerning repo sensitivity of basket/index derivatives regarding market making for instance.
The argument to compute such a repo ...
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136
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Calculate borrow/loan or repo rate
I was given this question on interview and couldn't find an answer in time (it is a software developer job in a place that deals with options). Can someone explain how to do this or point me to a good ...
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Valuation of a REPO
I thought I had a pretty good grasp on how to calculate this but I'm getting questioned on it and just want to be sure I'm not getting it mixed up. In my notation you enter into the repo contract at $...
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Bond price and credit exposure in Repo agreement
The answer is A. Could someone explain to me the reason that higher bond price reduces the credit exposure to the bank?
Why is B incorrect?
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Repo vs Reverse Repo terminology
This might be a basic question. But I am still confused about the terms. Please kindly suggest about my understanding of repo vs reverse repo and repo rate vs reverse repo rate with their applications ...
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Equity finance and primary brokerage and their products
I was in the project working on the asset classes known as EF/PB, which is short for Equity Fiance / Primary brokerage, I understand that Equity finance is more or less about securities lending, and ...
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How do Treasury bill/coupon settlements affect reserves?
Back in September when the repo market exploded, causes were attributed to corporate tax payments and T-bill settlements. Was hoping someone could help elaborate further on the mechanism as to how T-...
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Repo- A few questions [closed]
A few questions which could be related to each other, to help me gain familiarity with repo. These are accompanied with my guess. If anyone can explain in layman's terms (this is new to me).
1) I ...
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