Securities in Repurchase Agreements

C

The correct answer to the question is C. Rollover.

Repos, or repurchase agreements, are financial transactions in which one party (the seller/borrower) sells securities to another party (the buyer/lender) and agrees to buy them back at a later date, usually within a few days or weeks. The difference between the sale price and the repurchase price represents the interest paid to the buyer/lender for the use of the securities.

In a typical repo transaction, the securities involved are delivered on the settlement date, which is the date on which the buyer/lender pays for the securities and the seller/borrower transfers ownership. However, in some cases, the securities may not be delivered on the settlement date due to various reasons, such as technical glitches, operational issues, or market disruptions. In such cases, the parties may agree to extend the contract, which is known as a rollover.

A rollover is a repo agreement in which the securities involved are not delivered on the settlement date of the original agreement, and the contract is extended upon mutual agreement of the buyer/lender and seller/borrower. Rollovers are commonly used in the repo market to provide flexibility and continuity to market participants. Rollovers can be initiated by either party, but both parties must agree to the extension and the terms of the new contract.

Option A, Financial servicing, is not related to the repo market or securities lending.

Option B, Price-cap, is a term used in economics and refers to a limit on the price of a particular good or service.

Option D, Purchasing agreements, is a general term that can refer to various types of contracts or agreements related to the purchase of goods or services. However, it is not specific to the repo market or securities lending.