As a risk manager, what would be an accurate explanation for junior risk analysts about the key differences between repurchase agreements (repos) and reverse repurchase agreements (reverse repos), including the main participants involved in these transactions?

Exam-Like

A trader who would like to short a bond could enter into a repo to borrow the bond.

0.0%

Haircuts on collateral are typically charged to those who lend collateral in repo transactions, but margin calls are usually not made.

6.3%

When financing a purchase of securities, financial institutions often sell the repo to avoid putting up full purchase price for the securities.

81.3%

Money market mutual funds tend to enter into a repo to invest short-term liquid instruments.

12.5%

Financial Risk Manager Part 2