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When a borrower uses repo market for fund financing, he has to deliver the securities to the lender. One way to do this is to deliver the collateral to the lender or to the lender's clearing agent. At the end of the contract, the lender returns the collaterals to the borrower. This process, though simple and straightforward, the costs associated with delivering the collateral may turn to be expensive, particularly for a short-term repo. Instead of delivering the securities, the borrower, if the lender agrees, may hold the security in a segregated customer account. This transaction is called as Hold-In-Custody repo (HIC repo). Even this option is not free from risk. The borrower may use the collateral in another repo transaction. Despite the credit risk associated with HIC repo, it is used when the collateral is difficult to deliver, the transaction amount is very small and the borrower has good reputation. Another alternative to delivering securities is - the borrower can deliver the collateral to the lender's custodial account at the borrower's clearing bank. This process involves merely transfer of securities within the borrower's clearing bank. Suppose a dealer A enters into an overnight repo with X, A transfers the securities to the X's custodial account at A's clearing bank. Next day, the securities are transferred back to A. The dealer A can enter a new transaction with Y without redelivering the securities. The clearing bank establishes a custodial account for Y. this type of repo arrangement is known as tri-party repo.
One of the well-known soccer clubs in Australia, Sydney, has made a decision to include its players on the club's statement of financial position as assets. These players are signe
Net Income approach says that a raise in the proportion of debt financing in capital structure results in an increase in the proportion of a cheaper source of funds. This in turn r
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The Walter's model, thus relates the question of distributing the dividends and retaining the earnings to the investment opportunities that are available with the firm. (i) If a
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Internal capital rationing is used by firms for exercising financial control. How does a firm achieve this?
Fund Managers or the Asset Management Company (amc) The role of fund managers is highly significant in the mutual fund operations. So far, this role is being played by the Mutu
Q. Explain about Types of costs? Thus two types of costs are involved in keeping cash balance in a business- (i) Opportunity Cost (ii) Transaction Cost When cash balan
Sunk Cost This is a cost which has already been incurred and cannot be affected through present or future decisions.
what is logical process modelling? what is physical modelling?
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