A Proposed Accrued-Interest and Rate Adjustment for Repo Balance-Sheet Value

Summary

The document asks whether a standard or regulated method exists for calculating the balance-sheet value of a fixed-rate term repo. It proposes a formula that starts from the cash notional and accrued interest from the contract rate, then adds an adjustment involving the difference between the original repo rate and a rate observed at valuation, discounted over the remaining term. The notation distinguishes contract start, valuation date, maturity, notional, and the two rates.

No answer, regulatory reference, derivation, or market convention is provided, so the proposed expression should be treated as a question rather than a validated valuation method. The excerpt offers no evidence about how repo accounting value is recognized or how collateral, day-count conventions, discounting, or jurisdiction-specific rules affect it. Its practical value is as a starting point for examining the relationship between accrued repo interest and a current-rate adjustment, while leaving the appropriate accounting treatment unresolved.

Key ideas

• The document asks whether regulation or standard practice prescribes repo balance-sheet valuation.
• Its proposed expression combines accrued interest at the contract rate with an adjustment based on the current repo rate.
• The formula distinguishes the original notional, contract start, valuation time, and maturity.
• No derivation, regulatory source, or validation is given, so the expression remains unconfirmed.

Tags

# Balance Sheet Value of a Repo


# Balance Sheet Value of a Repo












I am relatively new to repos and I am trying to find out whether there is a standard practice for calculating balance sheet value of a repo. Are there any regulations that prescribe how banks shall calculate balance sheet value of a repo? Would the following approach make sense for a fixed rate term repo? $$V(t) = N\left\{1 + R(t_0)(t – t_0) + \frac{(R(t_0) – R(t))(T – t)} {1 + R(t)(T - t)}\right\}=N\left\{R(t_0)(t – t_0) + \frac{1+R(t_0)(T-t)} {1 + R(t)(T - t)}\right\},$$

where $N$ - repo notional (amount of cash borrowed), $t_0$ – repo contract start time, $t$ – valuation time, $T$ – repo maturity time, $R(t)$ – repo rate at time $t$, $R(t_0)(t – t_0)$ is the accrued interest.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.