Counterparty Risk Repurchase Agreements
In addition to using Repo as a financing vehicle, repo-traders are „marketplaceing.” These traders are traditionally known as „matched book repo resellers”. The concept of trading lost books closely follows that of a broker who perceives both parts of an active trade that, for the most part, has no market risk but has only a credit risk. Elementary book-match resellers engage in both repo and reverse repo in a short period of time and record the offer/question preededad gains between reverse repo and repo rates. Currently, credit book repo distributors use other profit strategies, such as non-compliant maturities. B, collateral swaps and liquidity management. From the buyer`s point of view, a reverse repot is simply the same buyout contract, not the seller`s. Therefore, the seller executing the transaction would call it a „repo,” whereas in the same transaction, the buyer would refer to it as a „reverse repo.” „Repo” and „Reverse repo” are therefore exactly the same type of transaction that is described only from opposite angles. The term „reverse-repo and sale” is commonly used to describe the creation of a short position on a debt security in which the buyer immediately sells on the open market the guarantee provided by the seller as part of the repurchase transaction. At the time of the count, the buyer acquires the corresponding guarantee on the open market and the pound to the seller.
In the case of such a short transaction, the buyer expects the corresponding warranty to decrease between the rest date and the billing date. The main difference between a term and an open repo is between the sale and repurchase of the securities. Funds from stable sources have high expected returns in accordance with the fund provider`s terms and conditions. Thus, liquidity management is at stake to compensate institutions for financing costs with the risks found in the absence of financial resources essential to survival. When a bank has several CRM techniques covering a personal exposure (for example. B a bank has both collateral and a guarantee covering a partial exposure), the bank must subdivide the exposure into elements covered by any type of CRM technique (for example. B share covered by security, part covered by a guarantee), and the weighted assets of each item must be calculated separately. If a single supplier`s credit guarantee has different maturities, it must also be subdivided into separate protection. Egg is the current value of all cash securities and securities sold by a repurchase agreement or otherwise reserved for the counterparty under the clearing agreement, where credit protection is granted for securitization risk, other companies currently rated with an external BBB rating – or rather – and which have been rated out with A at the time of credit coverage.
These include the credit guarantee of parent companies, subsidiaries and subsidiaries if they have a lower risk weighting than the debtor. In a repo, one of the major risks associated with lending money is the impending possibility of a borrower becoming insolvent and the lack of collateral to cover the amount of the loan.