Strategy #0000000059 · Secured funding and carry
Repurchase agreements and secured funding
Separate collateral yield, repo funding cost, haircut and collateral repricing.
A repo exchanges securities for cash with an agreement to repurchase them later at a stated price; a reverse repo lends cash against collateral. A haircut cushions small collateral moves but does not prevent losses from price declines, margin calls, tenor mismatch or funding interruptions.
A haircut is initial overcollateralisation; it does not remove margin, repricing, rollover or counterparty risk.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
What carry remains after repo funding, and how much collateral coverage survives a price shock?
Arun finances a government-bond position with repo and compares the bond yield with the repo rate. The initial haircut means posting collateral above the cash borrowed.
The simulator estimates holding-period spread carry on a 360-day basis, subtracts costs and checks collateral remaining after a price shock.
Real agreements include daily marks, haircut schedules, substitution rights, margin deadlines, close-out and legal terms. This simplified arithmetic is not a substitute for documentation or risk controls.
- Collateral required at 5% haircutEnter principal, collateral, haircut, both rates, tenor, costs and a stress decline to estimate carry and coverage.
- 30-day spread carry after assumed costsOmits coupon timing, specialness, daily margin, close-out, rollover and legal terms; this is not risk-free arbitrage.
- Collateral coverage after 5% price shockIllustrative expiry outcome.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
C_{req}=P/(1-h),\quad Carry=P(y_a-y_r)\frac{d}{360}-Cost,\quad Cover=C(1-s)-P
P is cash principal, h is haircut, y_a collateral yield, y_r repo rate, d holding days and s the collateral decline.
Greeks: the directional intuition
- 抵押品市值
- Measures sensitivity to implied volatility.
- 融資續作
- Measures sensitivity to implied volatility.
- 交易對手與法律
- Measures sensitivity to implied volatility.
C_{req}=P/(1-h),\quad Carry=P(y_a-y_r)\frac{d}{360}-Cost,\quad Cover=C(1-s)-P
Practical context · published observations
Repurchase agreements and secured funding: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
忽略票息時點、折扣券特殊性、逐日 margin、違約處置、融資續作與法律文件；不是無風險套利。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related methods still carry different exposures and failure modes.
Compare the input, position and assumptions that can fail.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Government-bond repo | Securities-backed funding | Uses government bonds to secure cash borrowing or lending. | Supply and specific-security scarcity affect rates. |
| Reverse repo | Cash lending | Lends cash while holding securities as collateral. | Counterparty, reinvestment and collateral risks. |
| Pawnbroking | Physical collateral loan | Secures short-term credit with a physical asset. | Valuation, consumer protection and law differ. |
Omits coupon timing, specialness, daily margin, close-out, rollover and legal terms; this is not risk-free arbitrage.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.