Repurchase agreements (repos)are used extensively to finance security holdings. In 2007,many investment banks and other financial institutions were unable to roll over their maturing repurchase agreements during the subprime mortgage crisis. This inability to get new repo financing is an example of

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The inability to roll over maturing repurchase agreements during the subprime mortgage crisis is an example of liquidity risk, which refers to the risk of not being able to meet short-term financial obligations. This is because repos are a common source of short-term funding for financial institutions. Credit risk refers to the risk of borrower default, sovereign risk is the risk associated with a country defaulting on its debt, technological risk is the risk of technology malfunctions, and operational risk is the risk of losses resulting from inadequate or failed internal processes, people, and systems.

Repurchase Agreements (Repos)are Used Extensively to Finance Security Holdings