Anatomy of the Reverse Repo

  1. What might typically happen is lower quality securities are swapped for better quality securities, which are already borrowed, and then the swapped better-quality assets get reused in secured financing transactions. To put it very simply, collateral transactions stretch out into long chains of reuse and repledging, at times rehypothecation, whereby the end result is how collateral just isn’t what it appears to be.

Leave a Reply

Your email address will not be published. Required fields are marked *

Author: admin