I love your films! They are not only suitable for beginners. I am a student of 4th year of finance and accounting and I still find your movies usefull - while revising or to understand some processes that my professors were not able to explain. And this subtle sense of humour... :) "...and this is my gold chain"
After 7:00 Actually from borrower's perspective, it is a repurchase agreement (repo) (because he will be repurchasing the watch to settle the transaction) and from the lender's perspective, it is a resale agreement (reverse repo) (because he will be reselling the watch). I suppose Sal used the terms other way round.
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. -wiki
Three Dogs and a Camper Essentially, the Fed is acting as a pawnshop with a very short timeframe for redemption. The usual places for overnight/daily loans were a bit short on liquidity...corporate taxes were due, and new US bonds were hitting the market...cash was scarce but lots of demand so the Fed stepped in as lender of last resort and provided the liquidity. The system worked...
Is not it wrong side of balance sheet? When bank sells treasury note to fed with an agreement to repurchase it, should not it be reflected as a repo trasanction, so liability (funding) side?
fabian: Seems like both the Bank and the Fed reserve collected interest. The Fed however devalued a set of bank treasuries (the watch) and waited for the Bank to pay back this artificial value, plus some interest. The person with the kidney work pays the most, for the Bank and Feds benefit.
one doubt, in repo loan, the gov securities are 1. sold and repurchased or 2. pledged, the ownership is transferred to central bank or retained by the bank themselves, and interest on gov securities is collected by whom the central bank or the bank itself, suppose if the ownership is transferred to the central bank then the interest is collected by central bank and after repurchase will the central bank return those interest to the bank or not, in case of pledging the interest payments are collected by bank i have no doubt on that, can anyone explain this soon ??
So is the discount rate the same as the reverse repurchase rate in the case that a commercial bank borrows money from the Fed under repurchase agreement?
Because they over invested in assets that they thought would appreciate fast which obviously they didn't so now they have to put those assets up as collateral to the fed to cover their cash shortage
This video is very helpful for a beginner like me. Can you also create a video where haircuts and margins are applied. I heard that that Haricuts means purchasing an item lower than it's value, say from $100, you purchased it at $90. My question is that when the item was purchased back,what will be the value of item? Is it $100 + interest or $90 +interest. Thank you
Sal you have helped me so much on understanding inflation, but can you make a video about deflation. I've written everything out on paper but I don't understand how the Fed cashes in its securites without causing all banks to become insolvent.
There's been some talk online about synthetic CDOs which are apparently of substantial quantity. According to these sources a large number of these synthetic CDOs are about to trigger some type of repurchase if more than 7 of 100 referenced banks fail. At this time 5 banks have failed with 2 or 3 partial failures equaling a total of 6 failures. Have you heard of these? My interest is in what the repurchase would mean. Do the owners of these have to rebuy or simply lose their investment?
I think the Fed delivers Reserves, not cash. Reserves do not pay interest but allow the Bank to lend more money. When the bank lends money the money is created
For example, would the Fed only "lend" the bank $10M if the bank gave them, say, $11M in treasury bonds? or does the Fed not require excess collateral value?
I'm assuming the buyer would require more "collateral" than the amount he is "lending out." Correct me if I'm wrong. Does the Fed require the bank to give more collateral than the amount that they lend the bank? Thanks.
Sal, I understand that you have degree in CS. Are you planning to do any tutorials on Java programming? I would love for you to do some videos on introductory topics. Thanks
![Felix "Unfair" | [Stray Kids : SKZ-PLAYER]](http://i.ytimg.com/vi/Oswujxm2Ag0/mqdefault.jpg)
This video is gold!! I love how you transited from layman term to real life Banking situation
I love your films! They are not only suitable for beginners. I am a student of 4th year of finance and accounting and I still find your movies usefull - while revising or to understand some processes that my professors were not able to explain. And this subtle sense of humour... :)
"...and this is my gold chain"
After 7:00 Actually from borrower's perspective, it is a repurchase agreement (repo) (because he will be repurchasing the watch to settle the transaction) and from the lender's perspective, it is a resale agreement (reverse repo) (because he will be reselling the watch). I suppose Sal used the terms other way round.
Exactly. . U r right
Yess
Right!
After hearing the word "repo" for 1 million times today I actually understood its meaning
Thank You so much
2:41
Totally thought he was about to say "I get to keep this nice ass watch."
hahahaha!!! i get it
Me too haha
Haha
HAHAHAHHA
I have a terrible professor. I can't believe how much precious time i spent. Thank you.
And probably a lot of $$$$$ too!
Man would I like to see this topic revisited by Khan academy based on today's economic trends!
Thank goodness for RUclips! !!
who's here after Fed pumped 1.5 Trillion in 2020 Coronavirus pandamic
yep, me.
Simple Learning hahaha
Indeed...nuff said...aaachooo😉
I’m watching the whole series. Very interesting and worthwhile, actually.
@@shreedhar333 Same here!
Timeless video considering how insane the Reverse repo market is right now in the FED 1.8 Trillion worth of activity!!!
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. -wiki
Really good work, explaining the repo market in a simple yet elegant way. Thank you
wow - REPO agreement explained really well - thank you!
"This is my gold chain." LOL
This took me 6 minutes to say , but I thought it was worth it 😂
Awesome! Best Fed.Repo explanation ever! thank you
Excellent presentation. Thanks for sharing.
Apparently there was a panic in the repo market today so I’m watching this to try understand what happened...
Join the club. Lol. I wanna know why they are borrowing over night and rates went up? Lol
Big business and big accounts are pulling their money
cisko213 Wrong.
William Wilson well??
Three Dogs and a Camper Essentially, the Fed is acting as a pawnshop with a very short timeframe for redemption.
The usual places for overnight/daily loans were a bit short on liquidity...corporate taxes were due, and new US bonds were hitting the market...cash was scarce but lots of demand so the Fed stepped in as lender of last resort and provided the liquidity.
The system worked...
the best way to teach about repo.. good job sal
This is so helpful! Thank you!
So this nicely done video was posted 12 years ago wow
my madam was so bad in teaching this....u saved me tnx
heh heh heh "the watch will literally change hands".
Great video. Thanks.
Great video, teaching people who have no clue in finance. I liked it. Just little confusing about Repo-sounds like a repossession
1:50 gottem dude, I love the critisism
really good video, freshened things up for my exam on saturday! But the whole time I kept thinking: why didn't he just sell his watch? :D
Is not it wrong side of balance sheet? When bank sells treasury note to fed with an agreement to repurchase it, should not it be reflected as a repo trasanction, so liability (funding) side?
thankyou for this! i really enjoyed watching this video it was funny😂
Great video. More to the REPO mechanism, may I ask how long usually is the repurchase date and what kinds of securities does the Fed accepts?
really nice explanation....
Thank you❤
Thank you
Now i understand it correctly .Thanksssss
fabian: Seems like both the Bank and the Fed reserve collected interest. The Fed however devalued a set of bank treasuries (the watch) and waited for the Bank to pay back this artificial value, plus some interest. The person with the kidney work pays the most, for the Bank and Feds benefit.
The teacher show his true nature he was actually a bank man with a mustache
Nicely explained 🤗
The example you used to define Repurchase agreement sound like bonds
one doubt, in repo loan, the gov securities are 1. sold and repurchased or 2. pledged, the ownership is transferred to central bank or retained by the bank themselves, and interest on gov securities is collected by whom the central bank or the bank itself, suppose if the ownership is transferred to the central bank then the interest is collected by central bank and after repurchase will the central bank return those interest to the bank or not, in case of pledging the interest payments are collected by bank i have no doubt on that, can anyone explain this soon ??
So is the discount rate the same as the reverse repurchase rate in the case that a commercial bank borrows money from the Fed under repurchase agreement?
Why is there a spike in the Repo Market today ? , why are so many banks short of cash ?
Because they over invested in assets that they thought would appreciate fast which obviously they didn't so now they have to put those assets up as collateral to the fed to cover their cash shortage
Love your gold chain lol
😄 Belle pédagogie !
This video is very helpful for a beginner like me. Can you also create a video where haircuts and margins are applied. I heard that that Haricuts means purchasing an item lower than it's value, say from $100, you purchased it at $90. My question is that when the item was purchased back,what will be the value of item? Is it $100 + interest or $90 +interest. Thank you
Sal you have helped me so much on understanding inflation, but can you make a video about deflation.
I've written everything out on paper but I don't understand how the Fed cashes in its securites without causing all banks to become insolvent.
There's been some talk online about synthetic CDOs which are apparently of substantial quantity. According to these sources a large number of these synthetic CDOs are about to trigger some type of repurchase if more than 7 of 100 referenced banks fail. At this time 5 banks have failed with 2 or 3 partial failures equaling a total of 6 failures. Have you heard of these? My interest is in what the repurchase would mean. Do the owners of these have to rebuy or simply lose their investment?
Is this the same process for the Bank Of England?
Question: During the time that the Fed is keeping the rep , do they keep the interest that is rolling in from those loans?
The simple Repo and reverse repo mechanism is like pawnbroking .. you and your rolex is doing repo while the pawnshop is doing reverse repo
Very helpful! Thank you
I think the Fed delivers Reserves, not cash. Reserves do not pay interest but allow the Bank to lend more money. When the bank lends money the money is created
Question: Is the collateral typically worth more or equal to the amount "loaned"?
For example, would the Fed only "lend" the bank $10M if the bank gave them, say, $11M in treasury bonds? or does the Fed not require excess collateral value?
I'm assuming the buyer would require more "collateral" than the amount he is "lending out." Correct me if I'm wrong. Does the Fed require the bank to give more collateral than the amount that they lend the bank? Thanks.
Perfect
I have a question.
When the money changes hands, who makes the interest on the money ?
The Federal government or the Bank ?
fed
here confusions is what is what is federal reserve???????
Thank you !
Can explain all this with one word “pawnshop”....... everybody knows how that works.
thanks
Who's watching in 2019? 😆
Try 2020
2024
Sal, I understand that you have degree in CS. Are you planning to do any tutorials on Java programming? I would love for you to do some videos on introductory topics. Thanks
Do we pay taxes on the transactions?
Maybe we can answere it
1. Who makes profit pays tax with no exception.
2. Every transaction premises profit for players at least for one player.
A drawing of a guy with thick moustache and a hat; definitely JP Morgan.
Gammon?
What happens when the bank can't pay back the fed with interest
overnight reverse repurchase agreement
great explanation, so repo is selling cheap and buying expensive what is yours from the same party because you desperately needed cash?)
This dude used to work at a hedge fund. Stoinkers
I would think that the lender would give you $20k for the difference. In the world, especially nowadays, it should be that way.
This video was made a month before the stock market bottomed.
The Bank; the Bank owns the government and the people because they own all the wealth of the nation.
like a pawn shop?
Remake plis
Cool
The big banks’ pawn shop
For this kind of repo agreement Raskolnikov (in Crime and Punishment) broke the skull of an old usurer lady..
who else came here because of potential 2020 market crash?
It'll be a slow decline.
You probably do have some shady side operations, Sal?
Hey Sal, your example is getting more insane, lol
you need to clarify the content
عِينة
money cannot buy happiniess
it does buy lodgings and groceries....(and kidney transplants)
Buy it back for 10001.
Needlessly complex
Isn't this video offensive to jews?
LOL
all this bs could have been explained under a minute. what a waste of time
Bc
are they explaining to children? go to kindergarden hey man.....
Fast forward January 2021, President elect Andrew Yang appoints Salman Khan to be the Treasury Secretary of the United States 😎