What is the buyers primary risk in a repo?
A) The credit risk on the collateral
B) The credit risk on the repo counterparty
C) The legal risk on the contract
D) The operational risk on margin maintenance

Question

Quizplus · Accepted Answer

The primary risk for the buyer in a repo is the credit risk on the repo counterparty. If the counterparty defaults before the end of the repo term, the buyer may not receive their cash investment or be able to recover the collateral. While credit risk on the collateral and legal and operational risks exist, they are secondary to the risk of default by the counterparty.

What Is the Buyers Primary Risk in a Repo