The REPO Handbook

Moorad Choudhry, a practitioner and academic in fixed income, wrote this reference on the repurchase agreement market, which is the mechanism through which securities positions are financed and through which short-term secured lending occurs.

The content covers the instrument's mechanics: the classic repo, the sell and buy-back, the legal documentation under the Global Master Repurchase Agreement, margin and haircuts, and the treatment of coupon payments and substitution. It covers the market's participants and purposes, including dealers financing inventory, investors lending cash against collateral, and traders borrowing specific securities to deliver against short positions, which produces the distinction between general collateral repo, where any acceptable security will do and the rate reflects cash market conditions, and special repo, where a specific security is in demand and the rate falls, sometimes to zero or below.

Further chapters cover repo trading strategies, the relationship between repo rates and the bond basis, government bond futures and cheapest to deliver calculation, securities lending as a related activity, tri-party arrangements, credit risk and its management, and the accounting and regulatory treatment. The book covers both sterling and international markets. Editions matter substantially, since central clearing, the post-2008 regulatory changes to bank balance sheets, and the transformation of central bank operating frameworks have all altered the market. The instrument mechanics are unchanged.