If the Federal Reserve is one of the acting parties, the PC is called a “system repository,” but if they act on behalf of a client (. B for example, a foreign central bank), it is called a “customer repository.” Until 2003, the Fed did not use the term “reverse repo” – which it said implied that it was borrowing money (against its charter), but instead used the term “matched sale.” While conventional deposits are generally instruments that are sifted against credit risk, there are residual credit risks. Although this is essentially a guaranteed transaction, the seller may not buy back the securities sold on the due date. In other words, the pension seller does not fulfill his obligation. Therefore, the buyer can keep the warranty and liquidate the guarantee to recover the borrowed money. However, security may have lost value since the beginning of the operation, as security is subject to market movements. To reduce this risk, deposits are often over-insured and subject to a daily market margin (i.e., if the guarantee ends in value, a margin call may be triggered to ask the borrower to reserve additional securities). Conversely, if the value of the guarantee increases, there is a credit risk to the borrower, since the lender is not allowed to resell it. If this is considered a risk, the borrower can negotiate a subsecured repot.  A pension purchase contract (repo) is a form of short-term borrowing for government bond traders.
In the case of a repot, a trader sells government bonds to investors, usually overnight, and buys them back the next day at a slightly higher price. This small price difference is the implied day-to-day rate. Deposits are generally used to obtain short-term capital. They are also a common instrument of central bank open market operations. Overall, a reverse pension transaction is a transaction between the closing date between the institution and the owner of the financial assets, in which: in a pension transaction, the Federal Reserve (Fed) buys U.S. treasury securities, U.S. agency securities or mortgage-backed securities from a primary broker who agrees to repurchase them within a period of generally one to seven days; an inverted deposit is the opposite. This is how the Fed describes these transactions from the perspective of the counterparty and not from its own point of view. buyback contracts (also known as rest) are only concluded with primary traders; Reverse-repurchase agreements (also known as “reverse-rest”) are implemented both with primary traders and with an expanded range of reverse pension counterparties, including banks, state-subsidized enterprises and money funds.
The same principle applies to rest. The longer the life of the pension, the more likely it is that the value of the security will fluctuate prior to the buyback and that economic activity will affect the supplier`s ability to execute the contract. In fact, counterparty credit risk is the main risk associated with rest. As with any loan, the creditor bears the risk that the debtor will not be able to repay the investor. Rest acts as a guaranteed debt, which reduces overall risk.