Securities Lending and Repos: Instruments and Strategies for Excess Return (SpringerBriefs in Finance)

The aim of this book is to present different manifestations and conventional transactions with securities lending and repos. Securities lending as a way of short selling is not only suitable for hedging cash market positions, it is also an essential prerequisite for valuing options on the futures market. Their valuation according to the option price theory is theoretically not possible without securities lending. If, at the same time, no derivatives are traded on the market as a substitute, the valuation of a portfolio of cash and futures market positions is difficult to practice. This is unacceptable for the annual financial statements of banks, insurance companies and other capital collection agencies. With securities lending and repos, returns can be achieved with selected strategies that are above the risk-free interest rate for corresponding maturities. Market participants use differential arbitrage and compensatory arbitrage with different interest rates and premiums on the market to achieve excess returns. This is not pure short selling. Interest rates and premiums in the market should theoretically strive towards equilibrium through these transactions. Market participants thus promote market efficiency, and the resulting changes in premiums and interest rates benefit all market participants. This book targets finance professionals working in capital markets and wanting to expand their knowledge of the topic. About This Book Contents About the Author List of Abbreviations List of Figures Chapter 1: Prologue Chapter 2: Introduction and Course of the Study Chapter 3: Forms of Securities Lending and Repos 3.1 Securities Lending 3.1.1 Definition, Basic Forms and Special Forms 3.1.2 Market Participants and Motives 3.1.2.1 Lender 3.1.2.2 Borrower 3.1.2.3 Intermediaries 3.1.3 Proceeds and Costs, Risks and Collateral 3.1.3.1 Lender 3.1.3.2 Borrower 3.1.3.3 Intermediaries 3.2 Repos 3.2.1 Definition, Basic Form and Special Forms 3.2.2 Market Participants and Motives 3.2.2.1 Pledgor 3.2.2.2 Pledgee 3.2.2.3 Intermediaries 3.2.3 Proceeds and Costs, Risks and Collateral 3.2.3.1 Pledgor 3.2.3.2 Pledgee 3.2.3.3 Intermediaries 3.3 Comparison of Securities Lending and Repos and Discussion of Assumptions 3.3.1 Comparison of Securities Lending and Repos 3.3.2 Discussion of Assumptions Chapter 4: Strategies with Securities Lending and Repos 4.1 Securities Lending with Futures Contracts on Stocks and Stock Indices 4.2 Securities Lending with Options on Shares and Share Indices 4.3 Repos with Futures Contracts on Stocks and Stock Indices 4.4 Repos with Options on Shares and Share Indices 4.5 Securities Lending with Repos and Vice Versa Chapter 5: Summary and Outlook Chapter 6: Epilogue Bibliography