Types of Repo and Related Products
There are three types of repo maturities: overnight, term, and open repo. Overnight refers to a one-day maturity transaction. Term refers to a repo with a specified end date. Open simply has no end date. Although repos are typically short-term, it is not unusual to see repos with a maturity as long as two years.
Repo transactions occur in three forms: specified delivery, tri-party, and held in custody (wherein the "selling" party holds the security during the term of the repo). The third form (hold-in-custody) is quite rare, particularly in developing markets, primarily due to the risk that the seller will become insolvent prior to maturation of the repo and the buyer will be unable to recover the securities that were posted as collateral to secure the transaction. The first form—specified delivery—requires the delivery of a prespecified bond at the onset, and at maturity of the contractual period. Tri-party essentially is a basket form of transaction, and allows for a wider range of instruments in the basket or pool. In a tri-party repo transaction a third party clearing agent or bank is interposed between the "seller" and the “buyer”. The third party maintains control of the securities that are the subject of the agreement and processes the payments from the "seller" to the "buyer."
Read more about this topic: Repurchase Agreement
Famous quotes containing the words types of, types, related and/or products:
“... there are two types of happiness and I have chosen that of the murderers. For I am happy. There was a time when I thought I had reached the limit of distress. Beyond that limit, there is a sterile and magnificent happiness.”
—Albert Camus (1913–1960)
“The rank and file have let their servants become their masters and dictators.... Provision should be made in all union constitutions for the recall of leaders. Big salaries should not be paid. Career hunters should be driven out, as well as leaders who use labor for political ends. These types are menaces to the advancement of labor.”
—Mother Jones (1830–1930)
“There is nothing but is related to us, nothing that does not interest us,—kingdom, college, tree, horse, or iron show,—the roots of all things are in man.”
—Ralph Waldo Emerson (1803–1882)
“... white people, like black ones, are victims of a racist society. They are products of their time and place.”
—Shirley Chisholm (b. 1924)