The cash paid on the initial sale of securities and the money paid at the time of the repurchase depend on the value and type of security associated with the pension. In the case of a loan. B, both values must take into account the own price and the value of the interest accrued on the loan. There are three main types of retirement operations. The main resting objective is to finance the purchase of securities by government bond traders until they can be sold to customers. These are private trades for which there are no public offerings. For example, because the U.S. Treasury sells its securities at auction, merchants must bid by indicating price and quantity and paying for successful bids up to the settlement date. However, the merchant cannot have all the money on the billing date, so if a merchant successfully bids for $1 billion, the merchant can pay $100,000,000 on the billing date and finance the rest through the Treasury provided they are redeemed after the merchant has received payment from his customers. Since the trader sells more securities, another portion of the guarantees are repurchased by the Treasury for the offer price, plus the interest accrued on the security, plus the interest charged by the Ministry of Finance for the maintenance of the inventory. Since most merchants can quickly sell most of their inventory, they only need to borrow money for a day or a maximum of a few days, which is why the conditions for most deposits are very short.

To determine the actual costs and benefits of a pension transaction, a buyer or seller interested in the transaction must take into account three different calculations: Robinhood. „What are the near and far legs in a buyout contract?“ Access on August 14, 2020. Deposits with longer tenors are generally considered a higher risk. Over a longer period of time, there are more factors that can affect the creditworthiness of first-time buyers, and changes in interest rates affect the value of the asset repurchased. When state-owned central banks buy back securities from private banks, they do so at an updated interest rate, called a pension rate. Like policy rates, pension rates are set by central banks. The repo-rate system allows governments to control the money supply within economies by increasing or decreasing available resources. A reduction in pension rates encourages banks to resell securities for cash to the state. This increases the money supply available to the general economy.

Conversely, by raising pension rates, central banks can effectively reduce the money supply by discouraging banks from reselling these securities. An open pension contract (also called on demand) works in the same way as a term pension, except that the trader and counterparty accept the transaction without setting the due date. On the contrary, trade can be terminated by both parties by notifying the other party before an agreed daily period. If an open deposit is not completed, it is automatically crushed every day. Interest is paid monthly and the interest rate is reassessed by mutual agreement at regular intervals. The interest rate on an open pension is generally close to the federal rate. An open repo is used to invest cash or finance assets if the parties do not know how long it will take them. But almost all open contracts conclude in a year or two. 2) Cash payment when the guarantee is repurchased A repurchase agreement (repo) is a form of short-term borrowing for traders in government bonds.