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 on the first day of the repo agreement.
- Because it must be paid back first if the security seller defaults.
- Because it is only required for 'initial' trades and waived for renewals.
- Because it represents the up-front equity stake required to enter the position.
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