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Former Member
Jul 15, 2010 at 11:44 AM

REPO revaluation - margining


Dear Experts,

We are face with following question of our customer related to REPO.

At some point during the lifetime of a bond, it can be possible that a remargining needs to be done. Apparently remargining is the process whereby the securities that have been given in collateral can chnag due to market price conditions. An example will make this more clear (hopefully).

Suppose you do a REPO with a third party for 60.000.000 u20AC, the third party (E.g. a bank) will then receive a security of ours valued 60.000.000 u20AC and will will receive from the third party a cash amount of 60.000.000 u20AC. Suppose now that a month later the market price of the security goes up and will be valued at 65.000.000 u20AC. Now we have a problem because we only did receive 60.000.000 u20AC in cash. According to our customer they are allowed to withdraw 5.000.000 u20AC out of the security account whereon they have put the security.

I would like to know if this process can be automated? If I look in the SAP TRM book their is a small chapter on margin (page 180). A referral is made to one step price valuation in position management. My questions:

A) Is this possible to automate?

B) If so is this done by managing the one step price valuation?

C) which position management procedure we should take? If already tested some but didn't work?

D) Can you give more information about how to do it?

many thanks,