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Repurchase Agreement (Rp)

Treasury or treasury bonds, corporate and treasury bonds, government bonds and equities can all be used as “guarantees” in a repurchase transaction. However, unlike a secured loan, the right to securities is transferred from the seller to the buyer. Coupons (interest payable to the owner of the securities) that mature while the pension buyer owns the securities are usually passed directly on the seller of securities. This may seem counter-intuitive, given that the legal ownership of the guarantees during the pension agreement belongs to the purchaser. Rather, the agreement could provide that the buyer will receive the coupon, with the money to be paid in the event of a buyback being adjusted as compensation, although this is rather typical of the sale/buyback. While conventional deposits are generally instruments that are sifted against credit risk, there are residual credit risks. Although this is essentially a guaranteed transaction, the seller may not buy back the securities sold on the due date. In other words, the pension seller does not fulfill his obligation. Therefore, the buyer can keep the warranty and liquidate the guarantee to recover the borrowed money. However, security may have lost value since the beginning of the operation, as security is subject to market movements.

To reduce this risk, deposits are often over-insured and subject to a daily market margin (i.e., if the guarantee ends in value, a margin call may be triggered to ask the borrower to reserve additional securities). Conversely, if the value of the guarantee increases, there is a credit risk to the borrower, since the lender is not allowed to resell it. If this is considered a risk, the borrower can negotiate a subsecured repot. [6] If the Fed wants to tighten the money supply, hungry for liquidity, it sells the bonds to commercial banks through a buy-back contract or a short repot. Later, they will buy back the securities through a reverse pension and return them to the system. The trader sells securities to investors overnight and the securities are repurchased the next day. The transaction allows the trader to raise capital in the short term. It is a short-term money market instrument in which two parties agree to buy or sell a security at a later date. It is essentially a futures contract. A futures contract is an agreement that must be concluded in the future at a price agreed in advance. It is simple, is a loan secured by underlying collateral that has market value.

The buyer of a pension contract is the lender and the seller of the repurchase agreement is the borrower. The seller of the pension contract must be called interest at the time of the redemption, the securities, the pension rate. The securities are sold simultaneously and purchased futures as part of a share repurchase agreement. Buying/selling functions reverse the trend; The warranty is purchased and sold simultaneously during a buyout. The difference between a traditional buyout contract in a buy-back contract is that the repurchase agreement is settled in the market. Among the instruments put in place by the Federal Reserve System to achieve its monetary policy objectives is the temporary addition or subtraction of reserve assets through pension and reverse pension transactions on the open market. These transactions have short-term effects and self-return on bank reserves. Essentially, reverse deposits and rests are two sides of the same coin – or rather a transaction – that reflect the role of each party. A repot is an agreement between the parties, in which the buyer agrees to temporarily acquire a basket or group of securities for a specified period of time. The buyer agrees to resell the same assets at a slightly higher price through a reverse inversion contract to the original owner.

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