In case of positive interest, it can be considered that the repurchase price PF is higher than the initial selling price PN. Treasury or government bills, corporate and treasury/government bonds, and shares can all be used as “collateral” in a repo transaction. However, unlike a secured loan, the right to securities passes from the seller to the buyer. Coupons (interest to be paid to the owner of the securities) due while the buyer in repo holds the securities are usually directly passed on to the seller in repo. This may seem counterintuitive, given that the legal ownership of the security rights during the pension contract belongs to the buyer. Instead, the agreement could provide that the buyer will receive the coupon, adjusting the cash to be paid during the redemption in order to compensate for this, although this is more typical of sales/redemptions. An open repo transaction (also known as a repo on demand) operates in the same way as a term repo, except that the trader and the counterparty accept the transaction without setting the maturity date. On the contrary, both parties can terminate the trade by informing the other party before an agreed daily deadline. If an open repo is not completed, it is automatically overwritten every day. Interest is paid monthly and the interest rate is regularly reassessed by mutual agreement. The interest rate on an open repo is usually close to the federal funds rate. An open repo is used to invest cash or to fund assets if the parties don`t know how long it takes them.

The main difference between a maturity and an open repo is between the sale and redemption of the securities. There are mechanisms built into the buyback space to reduce this risk. For example, a lot of rest is over-guaranteed. In many cases, if the collateral loses value, a margin call may take effect to ask the borrower to change the securities offered. In situations where it seems likely that the value of the security may increase and the creditor may not resell it to the borrower, the subsecure may be used to mitigate the risks. The pension market is one of the largest and most active sectors in short-term credit markets and is an important source of liquidity for MMFs and institutional investors. Repo transactions (also commonly referred to as repurchase agreements) are short-term secured loans, which are often obtained by traders (borrowers) to finance their securities portfolios and by institutional investors (lenders) such as money market funds and securities lenders as sources of secured investment. .

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