Thanks.
To make sure that i understand it fully, does the seller of stock in a specific repo have to sell it at a lower price than would be the case under a general collateral repo?
So the purchaser of the stock under a specific repo receives a higher return (i.e. repo rate) to compensate for the illiquidity of the gilts which he receives as collateral relative to a general collateral repo?
Does the term "market rates" in the core reading refer to the price of the gilt repo?
I am getting confused by the second sentence of the core reading: I would expect the repo rate on a specific repo to be higher than the repo rate on a general collateral repo, so why would the stock be tradin special when the repo rate on a particular stock is less than the repo rate on a general collateral repo?
Last edited by a moderator: Aug 18, 2014