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Remark on repo and options

  • Andrei Kapaev
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    The general and special repo rates are related with the prices of the European call- and American put-options. The evaluation takes into account specific business models of the parties in the repo agreement and the law restrictions. Using the repo-option relation, an alternative to the Black-Scholes method of option pricing is presented. The empirical data on the general and special repo rates are explained.

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    File URL: http://arxiv.org/pdf/1311.5211
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    Paper provided by arXiv.org in its series Papers with number 1311.5211.

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    Date of creation: Nov 2013
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    Publication status: Published in Advances in Economics and Business, Vol. 1(2) (2013) pp. 213 - 221
    Handle: RePEc:arx:papers:1311.5211
    Contact details of provider: Web page: http://arxiv.org/

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    1. Michael J. Fleming & Kenneth D. Garbade, 2004. "Repurchase agreements with negative interest rates," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Apr).
    2. James Bullard & Alison Butler, 1992. "Nonlinearity and chaos in economic models: implications for policy decisions," Working Papers 1991-002, Federal Reserve Bank of St. Louis.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
    4. Bottazzi, Jean-Marc & Luque, Jaime & Páscoa, Mário R., 2012. "Securities market theory: Possession, repo and rehypothecation," Journal of Economic Theory, Elsevier, vol. 147(2), pages 477-500.
    5. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    6. Vayanos, Dimitri & Weill, Pierre-Olivier, 2006. "A Search-Based Theory of the On-the-Run Phenomenon," CEPR Discussion Papers 5965, C.E.P.R. Discussion Papers.
    7. Treynor, Jack L & Black, Fischer, 1973. "How to Use Security Analysis to Improve Portfolio Selection," The Journal of Business, University of Chicago Press, vol. 46(1), pages 66-86, January.
    8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    9. Duffie, Darrell, 1996. " Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June.
    10. Frank Keane, 1996. "Repo rate patterns for new Treasury notes," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Sep).
    11. Borghan Nezami Narajabad & Cyril Monnet, 2012. "Why Rent When You Can Buy? A Theory of Repurchase Agreements," 2012 Meeting Papers 647, Society for Economic Dynamics.
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