The same principle applies to Repos. The longer the duration of the repo, the more likely it is that the value of the guarantees will vary before the redemption and that the activity will affect the buyer`s ability to honour the contract. In fact, counterparties` credit risk is the primary risk of rest. As with any loan, the creditor bears the risk that the debtor will not be able to repay the principal. Deposits act as a secured debt, which reduces the overall risk. And since the repo price exceeds the value of the guarantees, these agreements remain mutually beneficial for buyers and sellers. A sale/redemption is the cash sale and term repurchase of a security. These are two separate direct spot market transactions, one for futures settlement. The futures price is set in relation to the spot price in order to obtain a return on the market. The fundamental motivation for sales/redemptions is usually the same as for a classic repo (i.e.: The attempt to take advantage of the lower funding rates generally available for secured loans compared to unsecured loans). The profitability of the operation is also similar, with the interest on the money borrowed by the sale/redemption implicitly in the difference between the sale price and the purchase price.

Williamson adds, “The tri-party repo allows for security and better returns at a time when people are starting to lose money in normal deposits.” Deposits with a given maturity date (usually the next day or week) are long-term retirement operations. A trader sells securities to a counterparty with the agreement that he buys them back at a higher price at a given time. In this agreement, the counterparty receives the use of the securities during the term of the transaction and receives interest which is expressed as the difference between the initial sale price and the redemption price. The interest rate is set and the interest is paid at maturity by the merchant. A term repo is used to invest cash or to fund assets if the parties know how long it takes them. A repo is a form of short-term borrowing for government bond traders. In the case of a repo, a trader sells government bonds to investors, usually overnight, and buys them the next day at a slightly higher price. . .

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