1) The dependence of the tripartite pension market on intra-day credit provided by clearing banks lies between the sale and repurchase of the securities. A decisive calculation in each repurchase agreement is the implied interest rate. If the interest rate is not favourable, a reannument agreement may not be the most effective way to access cash in the short term. A formula that can be used to calculate the real interest rate is below: in general, credit risk for pension transactions depends on many factors, including the terms of the transaction, the liquidity of the security, the specifics of the counterparties concerned and much more. Despite the similarities with secured loans, deposits are actual purchases. However, since the purchaser only temporarily owns the guarantee, these agreements are often considered loans for tax and accounting purposes. In the event of bankruptcy, pension investors can, in most cases, sell their assets. This is another difference between pension credits and secured loans; For most secured loans, insolvent investors would remain automatic. Pension transactions are generally considered to be instruments for controlling credit risk. The biggest risk in a repo is that the seller does not maintain his contract by not repuring the securities he sold on the due date.
In these cases, the purchaser of the guarantee can then liquidate the guarantee in an attempt to recover the money he originally paid. However, the reason this is an inherent risk is that the value of the warranty may have decreased since the first sale and therefore cannot leave the buyer with any choice but to maintain the security he never wanted to maintain in the long term, or to sell it for a loss. On the other hand, this transaction also poses a risk to the borrower; If the value of the guarantee increases beyond the agreed terms, the creditor cannot resell the guarantee. Once the actual interest rate is calculated, a comparison between the interest rate and other types of financing will show whether the pension contract is a good deal or not. In general, pension transactions offer better terms than money market cash loan agreements as a secure form of lending. From a renu possibly`s point of view, the agreement can also generate additional revenue from excess cash reserves. The money paid in the initial sale of securities and the money paid at the time of the buyback depend on the value and type of guarantee associated with the pension. In the case of a loan. B, both values must take into account the own price and the value of the interest accrued on the loan. Deposits with a specified maturity date (usually the next day or the following week) are long-term repurchase contracts. A trader sells securities to a counterparty with the agreement that he will buy them back at a higher price at a given time.
In this agreement, the counterparty receives the use of the securities for the duration of the transaction and receives interest that is indicated as the difference between the initial selling price and the purchase price. The interest rate is set and interest is paid at maturity by the trader. A repo term is used to invest cash or financial investments when the parties know how long it will take them. In determining the actual costs and benefits of a pension transaction, the buyer or seller interested in the transaction must take into account three different calculations: pension transactions are generally considered safe assets, as the guarantee in question is a guarantee. why most agreements concern the United States.