Why the answer to this cannot be C? I thought delivery requirement would be a big factor here?作者: Zestt 时间: 2011-7-13 16:15
Physical delivery decreases the repo rate.
NO EXCUSES作者: Darien 时间: 2011-7-13 16:15
Physical Delivery gets you best repo作者: Iginla2011 时间: 2011-7-13 16:15
So, if you remove "physical delivery", it will increase repo - right? Hence delivery requirement is a big factor - that is what I thought.作者: skycfa 时间: 2011-7-13 16:15
They are asking what is most likely to increase the rate. The collateral is delivered so that wouldnt increse the rate. The term of the repo is two months which is much longer than a normal contract (usually overnight).....hence requires a higher rate.作者: lcai 时间: 2011-7-13 16:15
But you could undo the "collateral delivery" requirement and increase the rate. If it is not to be considered as a potential factor, I feel they should not even give it as a choice.作者: Roflnadal 时间: 2011-7-13 16:15
All three items are factor into the repo rate in this question:
quality of collateral-AAA sovereign = lower rate
deliver of collateral = lower rate
Term - longer than typical contract = higher rate作者: NakedPuts2011 时间: 2011-7-13 16:15
The key is the 2 months part...repos are typically overnight and rolled; two months is quite extensive for a repo, thus the increased rate
