Repurchase agreement

Orange County, California is one of the wealthiest counties in the county. Orange County had one of the largest municipal failures in U.S history. In 1994, the Orange County investment pool was declared bankrupt and realized $1.6 dollars of loss for their investors. The reckless behavior of the fund manager, Treasurer Tax Collector Robert Citron and lack of oversight from the Orange County Board of Supervisors led directly to the collapse. The bankruptcy is often termed a derivatives failure. Robert

maturities of one year or less. Trading in the money markets is done over the counter, is wholesale. Various instruments exist, such as Treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage-, and asset-backed securities. It provides liquidity funding for the global financial system. Money markets and capital markets are parts of financial markets. The instruments bear differing maturities

First of all, before reading this book, I did some research of Ben Bernanke, who is the writer of this book. Bernanke is not only the former Fed Chairman but also a great and knowledgeable economist. President Obama described him as “epitome of clam”. However, his career has huge merit, also has artificial wrong, merit half-and half. The Wall Street Journal commented that after suffering a financial crisis which he has never been through, the Fed Chairman Ben Bernanke lead United States avoid involving

overnight to one year in India which are close substitutes of money even the financial instruments. It had diversified from conventional platform of treasury bills and call money to commercial paper, certificates of deposit, repos, forward rate agreements and most recently interest rate swaps. “The money market fulfils the borrowing and investment requirements of providers and users of short-term funds, and balances the demand for and supply of short-term funds by providing an equilibrium mechanism”

accounting methods, which allowed Lehman to paint a perfect picture of its leverage ratios and to allegedly mislead investors. A common financing tool that Lehman frequently used, as well as other investment banks, were repurchase agreements, also known as repos. A repurchased agreement is a

The shadow banks responded to this by trying to issue new securities and force selling the underlying collateral. However due to the aforementioned slump in mortgages and real estate prices, this response failed and the value of these repurchase agreements continued to decline whilst the haircuts continued to increase. Due to this, lenders refused to offer short-term loans whilst haircuts grew to new highs. This meant that repo lending drastically decreased and lead to the collapse of the shadow

and help overcome asymmetrical information. 2. Wholesale Funding 2.1 Repurchase Agreement (Repo) How it functions: A repo is selling a security with a promise to redeem it in the future. In substance, a repo is a collateralized loan. For bilateral repo, borrower and lender transact directly with one another. In a bilateral repo, the borrower sells a security to the lender on the understanding that the borrower will repurchase the security on the following day at a premium, which is implicitly an

Lehman Brothers Holdings, Inc. (Case 1.2) Case Summary When Lehman Brothers filed for bankruptcy in September 2008 it was the largest corporate filing in our country’s history. Lehman Brothers Holdings Inc. declared $639 billion in assets and $613 billion in debt (Florescu, 2017). The filing of Lehman Brothers bankruptcy created a mass panic in the financial markets which caused an economic shockwave in both the U.S and foreign markets. Lehman’s collapse aggravated global financial markets for

QUESTION 1: RELATIVE PROFITABILITY There are several ways to measure a company’s earning and profitability. Return on Equity (“ROE”) and Return on Assets (“ROA”) are, historically, among the most widely used measures to assess relative profitability in the banking industry. The technique used in this paper is based on Dr. Cole’s ROE Model. This model helps “demystify” ROE and ROA; and focuses and analyzes the main factors that are driving profitability for a bank. For this paper, selected financial

The article Swap Spreads:2010 talks about a financial abnormity that the 30-year swap spread has kept negative since late 2008 for a long time, and an arbitrage opportunity based on the bet that LIBOR would never fall below equivalent government bond interest rates. Question1: Would you recommend that GIC do the bond/swap trade discussed in the case? Why or why not? The arbitrage portfolio is to enter into a 30-year LIBOR swap to pay fixed and receive floating interest payment, to long a 30-year