The Repo Market

Course description

Applications in Today’s Market

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.

The Repo Market - Applications in Today's Market - A 1 Day Course

9.00 – 9.40 REPOS IN THE CONTEXT OF THE MONEY MARKET
A bond repo can be thought of as a money market operation. An overview of money market products helps to compare the advantages and disadvantages of using the repo market, compared to, for example, the unsecured LIBOR market.
  • 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
9.40 – 10.30 BOND MARKET OVERVIEW
In order to understand how the bond repo mechanism works it is important to have a sound knowledge of bonds themselves.  This section quickly reviews key bond concepts, jargon and terminology
  • 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
 
10.30 – 10.45 Coffee Break
 
10.45 – 12.30 REPO MARKET
Bond repos can be classified into different types, referred to as – classic repo, sell/buy back and security lending.  This section describes the mechanics of these different types of repos.
  • 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
12.30 – 1.30 LUNCH
 
1.30 – 2.00 REPO MARKET – continued
  • 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
2.00 – 3.00 APPLICATIONS OF REPOS
The following section studies the relationships that exist between different market participants and why and how they use bond repos to meet their own  financial objectives.
  • 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
3.00 – 3.15 TEA
 
3.15 – 4.45 APPLICATIONS OF REPOS
  • 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
4.45 – 5.00 SUMMARY

 

Trainer

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.

 

FAQ

We offer banking and finance courses as well as soft skills and business management training. You can either attend an open public course in London or Dubai or arrange customised in-house training to be delivered in any of your offices worldwide.

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In London we use venues in the centre (near Oxford Circus station or in Mayfair) or in the City (near Liverpool Street or Moorgate stations).

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Our courses are run in central locations from 9 a.m until 5-5.30 p.m. There are 2 coffee breaks and a lunch break. Lunch is always provided in the venue.

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All our programmes are taught by senior specialists who have spent many years in their respective sectors, working as senior managers and head of departments, so they understand very well the market and the challenges you are facing.

The experience of our trainers allows us to create very practical programmes, focused on current market trends and challenges. You can be sure that you will gain the knowledge which can be instantly applied in your workplace after the course. You will be analysing real life case studies, take part in group exercises and discussions as well as role plays, whenever applicable.

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All our trainers have been working for many years in their respective sectors before they begun to teach so they bring a wealth of practical experience to the classroom.

Most of them used to work for 15 or more years in the financial sector and corporate world, and were holding positions of Directors, VP and Senior Managers. Some of them have published books and have written articles for specialised magazines and newspapers including FT, The Independent, The Times etc. You can find detailed biography of each trainer on the page of the course you want to register for.

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This topic can be arranged on in-company basis. If you have a group of 4 or more we can customise it and deliver in any location worldwide. Contact us to discuss your requirements

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