Repurchase Agreement And Security

The pension or „repo“ market is an obscure but important part of the financial system that has attracted increasing attention in recent times. On average, between $2 trillion and $4 trillion a day is traded in retirement operations – short-term secured loans. But how does the pension market work and what about it? Retirement activities (repo or PR) and reverse retirement activities (RSO) are two important tools used by many large financial institutions, banks and some businesses. These short-term agreements offer temporary credit opportunities that help finance day-to-day operations. The Federal Reserve also uses repo and reverse charge agreements as a method of controlling the money supply. Like many other corners of finance, pensions include terminology that is not common elsewhere. One of the most common terms in the repo area is „leg“. There are different types of legs: for example, the part of the retirement transaction in which the security is originally sold is sometimes referred to as the „starting leg“, while the next redemption is the „narrow part“. These terms are sometimes replaced by „near leg“ or „distant leg“.

In the period close to a repo operation, the title is sold. In the distant leg, he is redeemed. Longer-term deposits are generally considered a higher risk. For a longer period of time, more factors can influence the creditworthiness of the redemption and changes in interest rates have a greater impact on the value of the asset repurchased. In 2008, attention was drawn to a form known as Repo 105 after the collapse of Lehman, as it was alleged that repo 105s was used as an accountant`s trick to conceal the deterioration in Lehman`s financial health. Another controversial form of buyback order is the „internal repo“, first known in 2005. In 2011, it was proposed that the rest periods used to finance risky trades in European government bonds may have been the mechanism by which MF Global put at risk several hundred million dollars of client money before its bankruptcy in October 2011. A large part of the rest guarantee would have been obtained through the seizure of other customer security rights. [22] [23] A reverse retirement transaction (RSO) is an act of buying securities with the aim of reselling the same assets in the future at a profit. . .

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