Use

Repurchase agreements, or repos, represent a temporary transfer of securities in exchange for money. The basis of transaction is the obligation of the borrower to take back the securities pledged. The contract can oblige the lender to return the securities (real repurchase agreement), or merely gives him or her the right to return them (repurchase agreement with optional right).

The price calculator prices only real repurchase agreements. It is currently not able to price repurchase agreements with optional rights.

Integration

When you create a repurchase agreement, you define whether it is a repo with delivery , or a repo without delivery . For repurchase agreements with delivery, the underlying security is transferred from the borrower's security account to the lender's security account. For repurchase agreements without delivery, the underlying security remains in the borrower's security account. In both cases, the repurchase agreements are recorded in the borrower's accounts.

However, the price calculator does not distinguish between the product types repo with delivery , and repo without delivery . The system prices both as money market transactions. For more information, see Money Market Transactions . Repurchase agreements have no effect on the securities position in Risk Analyzer.

Scope of functions

In the NPV calculation, the system takes the individual cash flows of the transaction, and discounts them to the horizon using yield curves (as per the transaction currency). The net present value of a repurchase agreement is the total of the cash flows discounted to the horizon, and the translated to the evaluation currency.