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Please give me the correct answer and how to solve the problem There is an insatiable amount of demand for the on-the-run 5-year UST. You
Please give me the correct answer and how to solve the problem
There is an insatiable amount of demand for the on-the-run 5-year UST. You need to borrow it and you know that it is trading Special, such that the Repo Rate is negative. Assuming you have found a counterparty to lend you the bonds, what will the end (i.e., 2nd) leg of the trade look like from your perspective? Return bonds, pay principal, pay repo interest Return bonds, receive principal, pay repo interest Return bonds, receive principal, receive repo interestStep by Step Solution
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