Cross-Currency Repo

A cross-currency repo is an agreement in which the cash lent and securi- ties used as collateral are denominated in different currencies say, bor- row U.S. dollars with UK gilts used as collateral. Of course, fluctuating foreign exchange rates mean that it is likely that the transaction will need to be marked-to-market frequently in order to ensure that cash or securities remain fully collateralized.

Callable Repo

In a callable repo arrangement, the lender of cash in a term fixed-rate repo has the option to terminate the repo early. In other words, the repo transaction has an embedded interest rate option which benefits the lender of cash if rates rise during the repos term. If rates rise, the lender may exercise the option to call back the cash and reinvest at a higher rate. For this reason, a callable repo will trade at a lower repo rate than an otherwise similar conventional repo.

Whole Loan Repo

A whole loan repo structure developed in the U.S. market as a response to investor demand for higher yields in a falling interest rate environ- ment. Whole loan repo trades at a higher rate than conventional repo because a lower quality collateral is used in the transaction. There are generally two types: mortgage whole loans and consumer whole loans. Both are unsecuritized loans or interest receivables. The loans can also be credit card payments and other types of consumer loans. Lenders in a whole loan repo are not only exposed to credit risk but prepayment risk as well. This is the risk that the loan package is paid off prior to the maturity date which is often the case with consumer loans. For these reasons, the yield on a whole loan repo is higher than conventional repo collateralized by say U.S. Treasuries, trading at around 20-30 basis points over LIBOR.

Total Return Swap