[The objective of this glossary is to have terms definitions so we can cross reference with the Taxonomy map and elsewhere]
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Collateralised Debt Obligations are structured products that are backed by other assets. A CDO can be thought of as a promise to pay investors in a prescribed sequence (tranching), based on the cash flow the CDO collects from the pool of bonds or other assets it owns.
Derivatives
Equities
Repos
The word repo refers to the repurchase agreements that govern this market. Essentially it is a collaterized loan. The repo market allows banks and investors to exchange high-quality assets, usually US government bonds, for cash funding. Borrowers then repurchase the assets for a slightly higher price at an agreed date, usually the next day, creating a short-term loan. The market lets banks meet their short-term funding needs and is essential for the smooth operation of the dollar-based financial system. Market activity is concentrated between 7:00 and 8:30 am EDT and the NY FED actively monitors and intervenes in the market.
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Time between Opening and Closing legs is usually a day or two. This is the term of the repo. If the term of the repo is overnight, it is called an overnight; everything else is called a term repo. Term repos are more complicated due to margin calls. The observed price of the security rises or falls, there may be margin calls to preserve the haircut.
Closing leg:
Some articles
Breaking News: In the week of September 16 of 2019 there was a huge problem in the repo market. On Sept 16 and 17. lenders disappeared from the market, leaving many who wanted short term funding without takers; this created a huge spike in the overnight and term rates (rates spiked to 10%, when Federal Reserves target rates are 2.0 to 2.25). The commotion was quelled only when the NY FED stepped in providing liquidity in the market. Speculation abounds as to the root cause. The main effect was that there was more demand for cash than there was supply.
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