- Joined
- 8/11/11
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- 124
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- 278
Hi guys,
I have the following question relating repos:
In a repo, party A gives party B an asset (for instance, a bond) and party B gives the MV of the asset in cash to party A. They agree a repo rate and in the maturity of the repo, party B receives the initial cash plus the interests (repo rate) and party A receives the original asset.
So far so good. In fact, in Reuters these repo rate quote (up to 1Y).
But my question is: how does party B take into account the quality of the asset it receives? I mean, it's not the same to receive an AAA-bond than a BB-bond, in which teh repo rate should be higher.
However, I can't see on Reuters several repo curves, for different qualities of the underlying... I read something about a haircut, but who decide that haircut?
Thank you for your help!!!!
I have the following question relating repos:
In a repo, party A gives party B an asset (for instance, a bond) and party B gives the MV of the asset in cash to party A. They agree a repo rate and in the maturity of the repo, party B receives the initial cash plus the interests (repo rate) and party A receives the original asset.
So far so good. In fact, in Reuters these repo rate quote (up to 1Y).
But my question is: how does party B take into account the quality of the asset it receives? I mean, it's not the same to receive an AAA-bond than a BB-bond, in which teh repo rate should be higher.
However, I can't see on Reuters several repo curves, for different qualities of the underlying... I read something about a haircut, but who decide that haircut?
Thank you for your help!!!!
