The Repo Market - Applications in Today's Market

Course Description This 1 day course is designed for delegates who are either new to the business of bond repurchase agreements (repos) or want to refresh their knowledge. You will learn how repos are priced, settled and why they are transacted by different participants in the market, including pension funds, hedge funds, market makers and derivatives users.  You will also learn about bonds and key money market operations.  You will have a chance to explore applications of repos for risk management, speculation and arbitrage purposes with a particular emphasis on the relationship between the bond repo market and derivatives such as swaps and exchange traded bond futures.   Course Level: Introductory

What Will You Learn By the end of this course you will: Understand the repo market, its main players and types of transactions Explore the cash flows associated with different repo transactions Learn about different repo applications including yield curve trading, matched book trading and basis trading with futures Be able to identify and assess the risks arising from using repo and how to minimise the exposure to those risks Explore the recent market trends, the impact of the crisis and future developments

Main Topics Covered During This Training The repo in the context of the money markets Bond market overview The repo market: main participants & market size Repo instrument explained The mechanics of repo agreements Pricing and settlement Use or repo by different market participants

Who Should Attend Anyone who is new to the Repo market or want to refresh their knowledge about this instrument.   Prerequisites: Basic understanding of the following aspects will be useful: The concept of 'Time value of money' Bond and money market fundamentals Derivatives products including swaps, options and futures.  However, this is not an absolute requirement as a brief review of these topics is given at the start of the programme.

• Explanation of the money markets
• Importance of LIBOR as a benchmark rate
• T-bills, bills of exchange, 
• Certificate of Deposits, Commercial Paper
• Explanation of a repo
• Secured lending/borrowing rate

• Definition of bond types
• Fixed, floating, zero coupon bonds
• Coupon and accrued interest
• Clean (net) and dirty (gross) price
• Relationship between a bond price/yield
• Yield to maturity formula versus spot yield curve

• Market development and history 
• Definition of repo types and legal agreements
• Classic repo
• Determining the repo rate – special v general collateral
• Applying a “haircut” in a bi-lateral repo
• Mark to market
• Hold in custody repo and triparty arrangement
• Sell/buy back repo
• Repo rate implicit in sell back price

• Collateral lending
• Swapping one bond or asset for another
• Cross currency repos
• How does central clearing for repos work?
• Role of the clearing house
• Margining for repos and netting

• Bond dealers and market makers – financing a long or short position
• Pension funds – enhancing the yield on their portfolio
• Hedge fund managers – leveraged trading, spread trading
• Bank Repo desk – ALM funding operation

• Swap trader - warehousing a swap position 
• Bond futures and the concept of implied repo rate
• Bond dealers – covering a failed delivery
• Central bank operations – repo and open market operations

Paul North 

Paul has over 20 years experience of working and teaching in the financial and derivatives industry.  Paul joined the London International Financial Futures and Options Exchange (LIFFE) in 1988, spending several years on the exchange trading floor before transferring to LIFFE’s Business Development Department.

During his time at LIFFE, Paul worked in the fields of broker relations, product research and development, marketing, market automation and education. Paul was Head of Education at LIFFE, before leaving in Dec 1998 to pursue a freelance career in financial education and consultancy.

Paul is also a qualified teacher and has extensive speaking experience both in the UK and abroad, covering all the major aspects of financial markets.  Paul has taught delegates from virtually all of the worlds leading investment banks, funds and trading houses. The list of clients includes JP Morgan, Goldman Sachs, Deutsche Bank, Barclays Capital, Morgan Stanley and Merrill Lynch among others.

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Upcoming Public Courses

• Investment Performance Measurement - 17 Jun 2013 London
• International Securities Settlement and Custodial Services - 8-9 Jul 2013 London
• Understanding Derivatives - 4-5 Jul London

 

In-Company Training

• Understanding the Bond Market
• Bond Market and Bond Futures - Introductory and Advanced
• Cash and Near Cash Products
• Derivatives - Introductory to Advanced - Includes different types of derivatives and applications
• Derivatives in Risk Management and Trading
• Understanding Derivatives - Managing FX & Interest Rate Exposures
• Market Risk Management
• Derivatives - Applications and Settlement Process
• Fixed Income Derivatives
• Interest Rate Derivatives
• Pricing Options 
• • Managing FX Operational Risk
  • Project Management for Banks and Financial Institutions and more

 

If you have a group of 3 or more people, we can customise any of our 100 financial or soft skills programmes and deliver it in any location worldwide. 

All our trainers have at least 20 years of practical experience from their respective sectors and understand well the day-to-day requirements and challenges your employees are tackling. They have great communication skills and bring al lot of enthusiasm to the classroom. 

E-mail us or call on +44 (0) 207 995 8597 to discuss your requirements and we will be happy to prepare the training programme best suited for your organisation. 

Check our In-Company Training page.