Rental Agreement Backdated
October 4, 2021
Risk Of Licensing Agreements
October 5, 2021

Repo transactions are generally considered to be credit risk instruments. The biggest risk in a repo is that the seller may not maintain his end of contract by not buying back the securities he sold on the due date. In such situations, the buyer of the security right may then liquidate the security in an attempt to recover the money originally paid. However, there is an inherent risk that the value of the security may have fallen since the first sale and that, as a result, the buyer has no choice but either to hold the security that he never wanted to obtain in the long term or to sell it for a loss. On the other hand, this transaction also presents a risk for the borrower; if the value of the security exceeds the agreed terms, the creditor may not resell the security. As a form of secured financing, traders and other market participants offer more favourable conditions than traditional money market cash credit operations. Reverse retirement transactions are used by institutions to obtain income from their excess cash reserves. When the securities are sold, the sellers agree at the same time to redeem the securities at a certain price on a given day, including interest calculated at an agreed interest rate at the time of sale. The part of the repo transaction, when the security is sold, is called “start”, while the subsequent redemption is called “restricted part”. the borrower, and thus the person providing the collateral, is referred to as a “repo dealer”; the liquidity provider is called a reverse dealer. With the exception of a front start repo, the typical repo`s “starting leg” is set as a normal transaction. The “Close Leg” will be part of the clearing process on the day of invoicing. Longer-term deposits are generally considered a higher risk.

For a longer period of time, more factors can influence the creditworthiness of the redemption and changes in interest rates have a greater impact on the value of the asset repurchased. Repo transactions are done in three forms: specified delivery, tri-party and retained (the “selling” party holding the title for the duration of the repo). The third form (Hold-in-Custody) is quite rare, especially in development markets, especially because of the risk that the seller will become insolvent before the repo expires and the buyer will not be able to recover the securities that have been reserved as collateral for the transaction. The first form – the specified delivery – requires the delivery of a predefined loan at the beginning and expiry of the contract term. Tri-Party is essentially a form of shopping cart of the transaction and allows for a wider range of instruments in the basket or pool. In the case of a tri-party-repo transaction, an external clearing agent or bank between the “seller” and the buyer is invited. The third party retains control of the securities that are the subject of the contract and processes payments from the “seller” to the “buyer”. I`m not sure this will be addressed in later readings, but I base my question on reading the intro on Fixed Income. If a coupon loan is mortgaged as collateral in a pension contract, for the duration of the repo, if a coupon matures, who receives the payment? The original bondholder or the other party in repo? If a voucher is paid during this period, it can go either to the buyer or to the seller….

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