In a training session for junior risk analysts at a global financial institution, a risk manager is elucidating the differences between repurchase agreements (repos) and reverse repurchase agreements (reverse repos), highlighting the significant parties involved in these transactions. What is a correct statement that the manager should relay to the trainees?

Exam-Like

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

8.1%

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

16.2%

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

67.6%

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

8.1%

Financial Risk Manager Part 2