Master Repurchase And Securities Contract Agreement

Safety: The underlying security of a pension contract is security. Guarantees for pension transactions are short-term and liquid. Typical guarantees are U.S. Treasury bonds (for example. B U.S. Treasuries) and Treasury Bonds (z.B. Farm Credit Banks, Home Loan Banks). Public authorities should be aware of the risk factors of the underlying pension hedging instrument and refer to their investment policies to ascertain whether these guarantee instruments can be used for the buyback transaction. Securities purchased (assets) to guarantee the pension contract should retain a market value higher than that of the pension contract (margin, “haircut” or over-enitling). Pension transactions are generally considered safe investments, as the security in question serves as collateral, which is why most agreements involve U.S.

Treasury bonds. Considered an instrument of the money market, a pension purchase contract is indeed a short-term loan, guaranteed by security and an interest rate. The buyer acts as a short-term lender, the seller as a short-term borrower. The securities sold are the guarantees. This will help achieve the objectives of both parties, namely the guarantee of financing and liquidity. There are three main types of retirement operations. There are mechanisms built into the possibility of buyback agreements to reduce this risk. For example, many depots are over-secure.

In many cases, a margin call may take effect to ask the borrower to change the securities offered when the security loses value. In situations where the value of the guarantee is likely to increase and the creditor cannot resell it to the borrower, subsecured protection can be used to reduce risk. Despite the similarities with secured loans, deposits are actual purchases. However, since the purchaser only temporarily owns the guarantee, these agreements are often considered loans for tax and accounting purposes. In the event of bankruptcy, pension investors can, in most cases, sell their assets.