Margin and Repurchase agreement: Difference between pages

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1. ''Accounting.''
(Repo).  


Profit margins measure the surplus of revenues over relevant costs, often expressed as a percentage.
1. ''Effective collateralisation by legal transfer of securities.''


Profit margins are usually expressed as a percentage of revenues, for example in the Net profit margin.
A form of secured borrowing, using a simultaneous agreement to:


(i) Sell securities at the start of the contract, and <br>
(ii) Buy them back later at a pre-agreed (higher) price at a fixed future date.


Less commonly, margins can also be expressed as a margin (percentage) on relevant costs.


Gross profit measured as a percentage of costs is also sometimes known as ''markup'', an amount added to costs to determine a selling price.
The ''party selling securities'' (usually bonds, gilts, treasuries or other government or tradeable instruments) at the start of the contract is the ''borrower'', receiving cash at the start and tied to an agreement to buy the securities back at a specified later date and price.


In the event of the borrower's default, the lender (party providing the cash to the borrower) can sell the collateralised security to recoup some or all of its investment.


2. ''Banking.''


Net interest margin (NIM).
A reverse repurchase agreement (reverse repo) is the mirror image of the repo transaction, from the investor/lender’s view – and could logically have been called a “re-sale agreement”.




3. ''Bank lending.''  
2. ''Collateralisation without legal transfer of securities.''


Lending margin is a percentage amount added explicitly to a market reference rate, to calculate the total rate of interest payable by a borrower.
By extension, collateralised borrowing using securities as the collateral (without legal transfer of the securities).
 
 
4. ''Derivatives markets.''
 
Margin is a refundable deposit payable by market participants to protect other participants in the market against the risk of a default.
 
In this context, margin is a form of collateral.
 
 
5. ''Financing.''
 
An amount implicitly built into a total interest rate or discount rate - charged to a client - to cover risk and a level of profit for the finance provider.
 
 
6. ''Secured lending.''
 
An amount deducted from the value of an asset used as collateral, to calculate the maximum amount of any loan to be secured against the asset.
 
Also known as a 'haircut'.
 
 
7.  ''Project planning and management.''
 
A ''safety margin'' is an allowance for worsening of a key input or variable in a project.
 
 
8.
 
Any other difference, usually a relatively small difference compared with the amounts themselves being compared.
 
For example, forward margin in foreign exchange markets.




== See also ==
== See also ==
* [[Alternate Base Rate]]
* [[Bilateral repurchase agreement]]
* [[Bank margin]]
* [[Cash in the new post-crisis world]]
* [[Basel Committee on Banking Supervision]] (BCBS)
* [[Closing leg]]
* [[Global Master Repurchase Agreement]]
* [[Tri-party repurchase agreement]]
* [[Collateral]]
* [[Collateral]]
* [[Contribution margin]]
* [[EMIR]]
* [[Exchange traded]]
* [[Forward margin]]
* [[Futures]]
* [[Haircut]]
* [[Haircut]]
* [[Initial margin]]
* [[Monetisation]]
* [[International Swaps and Derivatives Association]] (ISDA)
* [[Opening leg]]
* [[International Organization of Securities Commissions]] (IOSCO)
* [[Repo rate]]
* [[Maintenance margin]]
* [[Reverse repo rate]]
* [[Margin call]]
* [[Reverse repurchase agreement]]
* [[Margin compression]]
* [[RONIA]]
* [[Margin of safety]]
* [[Securities Financing Transaction]]
* [[Margin on costs]]
* [[Securities Financing Transactions Regulation]]
* [[Margin risk]]
* [[Security]]
* [[Marginal]]
* [[Margining]]
* [[Markup]]
* [[Net profit margin]]
* [[NII]]
* [[NIM]]
* [[Over the counter]]
* [[Profit margin]]
* [[Stepped margin]]
* [[Sustainability Linked Loan Principles]]
* [[Tax sparing]]
* [[Uncleared Margin Rule]]  (UMR)
* [[Variation margin]]
* [[WGMR]]




== External link ==
===Other links===
[https://www.bis.org/bcbs/publ/d499.pdf Margin requirements for non-centrally cleared derivatives - BCBS and IOSCO]
[http://www.treasurers.org/node/8409 Repos - a sign of the times, ACT 2012]


[[Category:Accounting,_tax_and_regulation]]
[http://www.treasurers.org/repos  ACT briefing note: Practical steps to investing in Repos ]
[[Category:The_business_context]]
[[Category:Financial_products_and_markets]]

Revision as of 13:56, 20 November 2023

(Repo).

1. Effective collateralisation by legal transfer of securities.

A form of secured borrowing, using a simultaneous agreement to:

(i) Sell securities at the start of the contract, and
(ii) Buy them back later at a pre-agreed (higher) price at a fixed future date.


The party selling securities (usually bonds, gilts, treasuries or other government or tradeable instruments) at the start of the contract is the borrower, receiving cash at the start and tied to an agreement to buy the securities back at a specified later date and price.

In the event of the borrower's default, the lender (party providing the cash to the borrower) can sell the collateralised security to recoup some or all of its investment.


A reverse repurchase agreement (reverse repo) is the mirror image of the repo transaction, from the investor/lender’s view – and could logically have been called a “re-sale agreement”.


2. Collateralisation without legal transfer of securities.

By extension, collateralised borrowing using securities as the collateral (without legal transfer of the securities).


See also


Other links

Repos - a sign of the times, ACT 2012

ACT briefing note: Practical steps to investing in Repos

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