NO.PZ2020011303000023
问题如下:
Explain how a dollar roll works and why it is different from a repo as a way of using securities that are owned to borrow money.
解释:
A dollar roll involves raising funds by selling a pool in one month and buying a similar pool back the following month. Properties such as coupon, principal, and maturity are specified but the party with a short position chooses the actual pool that will be delivered. This means that the pool that is received during the second month may be different from the one sold during the first month. This is one difference between a dollar roll and a repo. The other difference is that interest does not have to be added to the price paid in the second month because the trader who sells and then buys loses one month of MBS income,while the trader on the other side gains one month of MBS income.
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