2) Cash funds payable when the security is repurchased are a repurchase agreement, also known as pension loans, is an instrument for obtaining short-term funds. With a pension transaction, financial institutions essentially sell someone else`s securities, usually a government, in a night transaction and agree to buy them back later at a higher price. The guarantee serves as a guarantee to the buyer until the seller can repay the buyer and the buyer receives interest in return. This type of pension contract is the most common agreement on the market. A third party acts as an intermediary between the lender and the borrower. The security will be given to the third party and the third party will provide replacement guarantees. An example would be that a borrower pays a certain amount of shares for which the lender can enter into equivalent bonds as collateral. A buy-back contract is a short-term loan to raise money quickly. The bank rate is explained. This is the “eligible security profile” that allows the purchaser to take the risk of defining his appetite for risk with respect to the collateral he is willing to hold for his money. For example, a more reluctant pension buyer may only hold “current” government bonds as collateral. In the event of liquidation of the pension seller, the guarantee is highly liquid, so that the pension buyer can quickly sell the security. A less reluctant pensioner may be willing to take bonds or shares as collateral without investment degree bonds or shares, which may be less liquid and which, in the event of a pension seller`s default, may experience higher price volatility, making it more difficult for the pension buyer to sell the guarantees and recover his money.

Tripartite agents are able to offer sophisticated collateral filters that allow the repo buyer to create these “legitimate collateral profiles” capable of generating systemic collateral pools reflecting the buyer`s appetite for risk. [13] A pension purchase contract (repo) is a form of short-term borrowing for government bond traders. In the case of a repot, a trader sells government bonds to investors, usually overnight, and buys them back the next day at a slightly higher price. This small price difference is the implied day-to-day rate. Deposits are generally used to obtain short-term capital. They are also a common instrument of central bank open market operations. 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.

For example, Dealer A may sell a certain warranty to Dealer B at a specified price and agree to repurchase the warranty for a specified amount at a later date. In reality, the sale is not a real sale, but a loan guaranteed by security. As with secured loans, the guarantee used as collateral is “owned” by Dealer B (in the event of dealer A default and does not refund the amount to Dealer A. The incremental amount that must be repaid by Trader A to redeem the guarantee is the amount of “interest” earned by Traders B on the loan.