The Japanese Repo Market: Theory and Evidence

Naohiko Baba and Yasunari Inamura
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Naohiko Baba: Bank of Japan
Yasunari Inamura: Bank of Japan

Bank of Japan Working Paper Series from Bank of Japan

Abstract: Repurchase Agreements (Repo) transactions are widely used as a risk-free means of raising or investing funds. Repo transactions can be categorized into the following two types: (i) general repos whose purpose is to borrow or lend funds, and (ii) special repos whose purpose is to borrow or lend securities. General repo transactions generate the linkage between the repo market and money markets including the interbank market, while special repo transactions generate the linkage between the repo market and securities markets, typically the government bond market. The objective of this paper is to examine the mechanism of the Japanese repo market from both theoretical and empirical perspectives.

Keywords: Repo Market; Government Bond Market; No-Arbitrage Condition; Repo Spread, Cash Premium; Most Recently Issued (On-the-Run) Bond; Cheapest to Deliver (CTD); Short Sales (search for similar items in EconPapers)
Date: 2002-04-19
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