Retirement operations are a way to finance a security position. You have a secured loan that gives you your security for money. Deposits with a specified maturity date (usually the next day or the following week) are long-term repurchase contracts. A trader sells securities to a counterparty with the agreement that he will buy them back at a higher price at a given time. In this agreement, the counterparty receives the use of the securities for the duration of the transaction and receives interest that is indicated as the difference between the initial selling price and the purchase price. The interest rate is set and interest is paid at maturity by the trader. A Repo term is used to invest cash or to finance assets when the parties know how long it will take them. There are three main types of retirement operations. During the transaction, all the coupons due belong to the rightful owner, “the borrower.” However, if this happens, a cash amount equal to the coupon is paid to the original holder, the so-called “manufactured payment.” In order to avoid the payment of coupon tax, some institutions will refund the guarantee to a tax-exempt unit and receive the payment produced and avoid the tax (“washing by coupon”) To my knowledge, the sale of shares with the promise to buy them back later is called repo (short for the retirement contract). If you sell a loan on repo and the loan pays its periodic payment while another party owns it, who receives the payment, the pension issuer or the pension buyer? Pension transactions are generally considered to be a reduction in credit risk. The biggest risk in a repo is that the seller does not maintain his contract by not repuring the securities he sold on the due date. In these cases, the purchaser of the guarantee can then liquidate the guarantee in an attempt to recover the money he originally paid. However, the reason this is an inherent risk is that the value of the warranty may have decreased since the first sale and therefore cannot leave the buyer with any choice but to maintain the security he never wanted to maintain in the long term, or to sell it for a loss.
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