Financial Risk Manager Part 2
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While instructing novice risk analysts at an international financial institution, a risk management expert is detailing the differences between repurchase agreements (repos) and reverse repurchase agreements (reverse repos), as well as highlighting the main participants in this market. Which statement can the expert accurately present to the trainees?
A
A trader who would like to short a bond could enter into a repo to borrow the bond
B
Haircuts on collateral are typically charged to those who lend collateral in repo transactions, but margin calls are usually not made.
C
When financing a purchase of securities, financial institutions often sell the repo to avoid putting up full purchase price for the securities.
D
Money market mutual funds tend to enter into a repo to invest short-term liquid instruments.