Repo

CFA Level I
#1

I am wondering if anybody met with a question to calculating REPO. I hope its just the concept that we want to learn.

#2

kochunni69 Wrote: ------------------------------------------------------- > I am wondering if anybody met with a question to > calculating REPO. I hope its just the concept that > we want to learn. yeah, i have. i hope they ask a qualitiative one, i dont recall a formula. as far as i know, a repo is a short ter,m borroing, typically overnight. i assume i banx do this a lot, i kinda dont know much outside of that sorry.

#3

Investopedia Says. ----------- A form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement. … Repos are classified as a money-market instrument. They are usually used to raise short-term capital.

#4

bonus question…when the fed lowers interest rates are they doing a repo or a reverse repo? this will help u understand one of the many important concepts about repo

#5

Except the Fed thing seems backwards to me…

#6

Didn’t they also start accepting agencies and other securities as collateral whereas in the past it was just treasuries?

#7

mib20 Wrote: ------------------------------------------------------- > bonus question…when the fed lowers interest > rates are they doing a repo or a reverse repo? > this will help u understand one of the many > important concepts about repo Fed lowes rates = hghier $ supply, means they are net buyers of bonds in the open market boom

#8

the fed is accepting agency mortgage paper in return for treasury securities (not necessarily cold hard cash)…and this is for 28 days on repo answer to the question before…when fed is targetting a lower fed funds rate, they are doing a reverse repo

#9

JoeyDVivre Wrote: ------------------------------------------------------- > Except the Fed thing seems backwards to me… You are right Joey… The Schweser Instructor just told us to be familiar with the concept. Even if there is computational problem, it won’t be hard either… i hope.

#10

> > answer to the question before…when fed is > targetting a lower fed funds rate, they are doing > a reverse repo yup, good. FEd is net buyer.

#11

mib20 Wrote: ------------------------------------------------------- > the fed is accepting agency mortgage paper in > return for treasury securities (not necessarily > cold hard cash)…and this is for 28 days on repo > > answer to the question before…when fed is > targetting a lower fed funds rate, they are doing > a reverse repo Except that’s not true. When the Fed is supplying funds, they describe that as a repo. The transactions are described from the perspective of the dealer.

#12

I have only seen it as a reverse repo.

#13

It seems backwards to me, too. From http://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html: Repos, also called repurchase agreements or RPs, are a form of collateralized loan where the Fed lends money to primary dealers, and the primary dealers give the Fed high-quality securities as general collateral against the loan. … Reverse repo transactions are the opposite of RPs. Instead of lending money to the dealers, the desk borrows money from the dealers versus collateral from the System Open Market Account.

#14

ha thanks for that…head spinning again on repos