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Suggestions to develop Korea’s repo market

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  • Suggestions to develop Korea’s repo market
  • Joo, Hyunsoo
  • Korea Capital Market Institute


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Title Suggestions to develop Korea’s repo market
Similar Titles
Material Type Reports
Author(English)

Joo, Hyunsoo

Publisher

[Seoul]:Korea Capital Market Institute

Date 2013-08
Series Title; No Capital Market Opinion
Pages 5
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding KCMI

Abstract

Since 2008, Korea’s money market has experienced a significant shift: Call loans were the most widely used money market instrument, but they have been replaced with repo contracts. Repo contracts are also exposed to risk because the securities used as collateral are subject to mark-to-market pricing. If one party in a repo contract is forced to put the securities on fire sale during a specific event such as a financial crisis, the prices will abruptly fall and this will have fast, far-reaching effects on the market. To effectively cope with this potential problem, it is necessary to diversify the structure of Korea’s repo market. More specifically, the term structure of repo contracts should be diversified, and open term contracts should be facilitated. This will secure enough time to respond to a shock, and eventually help reduce systemic risk.