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9 Cards in this Set
- Front
- Back
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What's repo?
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* Repurchase agreement
> |
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What's the point of a repo?
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Allows a cash loan for a fixed interest rate but needs a collateral
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What's the life cycle of the collateral?
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borrower sells the security immediately to the lender
& agree to buy the same security from the lender at a fixed price at some later date outright transfer of ownership right |
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What's the interest of a repo?
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forward price - spot price
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What's market risk?
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Risk that the value of a portfolio will decrease due to change in value of the market risk factors
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What are the four type of market risk?
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Equity risk - stock prices
Interest rate risk Currency risk - FX Commodity Risk - commodity prices, e.g. corn, copper, oil |
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Commodity risk factor
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cost
price - fx etc quantity political risk |
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Capital Asset Pricing Model
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CAPM
r = R_f + beta x (K_m - R_f) |
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explain r = R_f + beta x (K_m - R_f)
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r - expected return rate on a security
R_f - rate of a risk-free investment K_m - return rate of the appropriate asset class beta - volatility, relative to the asset class |
