easy · FRM Part 2 Liquidity & Treasury Risk
Why is the repo haircut often referred to as 'initial margin' in institutional collateral management?
- Because it is the interest paid only on the first day of the repo deal
- Because it must be the first amount paid back if the seller later defaults
- Because it is only required on the very first trade date and is waived thereafter on renewals
- Because it represents the up-front equity stake required to enter the position.
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