Professional Documents
Culture Documents
Repo Definition
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©2004 Ernst & Young LLP. All rights reserved. 1 Executive Event – Financial Statement Audits – 1UYJX4
Post-Interim Event
Classic Repo
First Leg
Sells 100 worth of bond
BANK A BANK B
BANK A BANK B
Margin
• An initial margin is given to the supplier of cash in the
transaction. The market value of the collateral is reduced (or
given a “haircut”) by the amount of margin when determining
the value of cash lent out
• Size of the margin depends upon the credit quality of the
counterparty, term of the repo, duration and quality of the
collateral
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©2004 Ernst & Young LLP. All rights reserved. 2 Executive Event – Financial Statement Audits – 1UYJX4
Post-Interim Event
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©2004 Ernst & Young LLP. All rights reserved. 3 Executive Event – Financial Statement Audits – 1UYJX4
Post-Interim Event
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©2004 Ernst & Young LLP. All rights reserved. 4 Executive Event – Financial Statement Audits – 1UYJX4
Post-Interim Event
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©2004 Ernst & Young LLP. All rights reserved. 5 Executive Event – Financial Statement Audits – 1UYJX4