Strategies · Library · Cash
§17.4Carry
Repurchase agreement (REPO)
Lend cash and receive securities as collateral, with an agreement to reverse the trade later (or borrow cash the same way). Terms run from a day to about six months.
- Asset class
- Cash
- Held for
- Days
- Data
- Needs data ARCANE lacks
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Repo interest rate against alternatives
- Entry and exit
- Open the repo; unwind at the agreed date
- Sizing
- Sized by cash available
How it fails
- Counterparty risk
- Collateral value falls
- Rate changes
Data it needs
- repo rates
- collateral prices
No repo market data.
How ARCANE uses it
Background for questions about short-term funding. Paper only.
Repo is not a price series ARCANE tracks.
Filed under the carry card
Own what pays more than it costs to finance (the return if prices stand still) and sell what pays less, across currencies, bonds, commodities and stock indexes.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §17.4, p. 115 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.