Last Updated on January 29, 2022 by Admin 3
What happens when the issuer of a bond being used as collateral in a classic repo fails to pay a coupon on the bond during the term of the repo?
- The transaction is terminated and the collateral is returned to the seller
- The transaction is rolled over until the coupon is paid or the issuer becomes insolvent, at which point the seller becomes an unsecured creditor of the issuer
- The buyer is obliged to make a manufactured payment to the seller and becomes an unsecured creditor of the issuer
- The buyer is not obliged to make a manufactured payment to the seller but the buyer is likely to ask for margin