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Questions: 1.Why would people and countries in the "Gulf region or some Asian countries" have large holdings of good collateral such as US Treasuries? 2.Whats the difference between a bilateral and triparty repo? Draw diagrams of each. 3.A 10 percent haircut on a repo is equivalent to what initial LVR on a margin loan? 4.In Singhs 2011 paper in Figure 2 Representative Leverage Levels in some HF strategies, what is the leverage ratio depicted? A debt-to-equity or debt-to-assets ratio? State your reasons. 5.In Singhs 2011 paper in Figure 2 Representative Leverage Levels in some HF strategies, why might hedge funds use so much leverage for arbitrage compared to other strategies? 6.In Singhs 2011 paper in Figure 2 Representative Leverage Levels in some HF strategies, how exactly can hedge funds long credit using leverage? Be specific. 7.What is the size of the global rehypothecation shadow banking money supply discussed by Manmohan Singh in either of his articles? Use the most up-to-date figure. Answers: 1.These regions need large holdings of good collateral like US Treasuries because transacting on wholesale capital markets must be secured by the marketable collateral. The large banks and dealers utilize and re-utilize collateral that nonbanks pledge as a mechanism of lubricating global financial system because collaterals are re-usable and secured funding for dealers (Fuhrer, Guggenheim and Schumacher 2016). These collateral require balance sheet space that allow movement within the financial systems. However, some novel regulations which limit private sector bank balance sheets could have the impact of impeding the flow of collateral. These collaterals are used to finance their business as the respective banks still use this old benchmark when giving loans due to high default risks in both Gulf region and Asian regions. Banks need these marketable security which are more liquid to ensure their safety even in the case of default. 2.A tri-party repo (repurchase agreement) is the transactions for which the post-trade processing-selection of collateral, payment and settlement; custody as well as management during the transaction life-remains outsourced by parties to the agent of the third party. The tri-party agents remain the custodian banks (Wee et al. 2015). The utilization of the tri-party service leaves the relationship between parties unchanged because the tri-party agent is merely an urgent who does partake in risk of transaction. A bilateral repo is the repurchase agreement between parties. Here, the corporate investor takes the responsibilities for the administrative process including both confirmation and settlement of trade and everyday management of collateral. It differs from the tri-party repo, whereby an agent acts as the middleman between the 2 principal parties as well as deal with the associated administrative processes (Keller, Bouveret, Picillo, Liu and Mazzacurati 2014). 3.A haircut describes the percentage discount deducted from market value of security offered as repo collateral to compute purchase price. Haircut is arrived by ((collateral market value less purchase price)/ market value)) X 100. LVR (loan-to-ratio-value describes a financial ratio lenders use when expressing loan to value ratio of asset purchased. Thus where haircut is 10%, the LVR is 90% 4.The leverage ratio depicted here is a debt-to-equity. This is seen by having equity (long or short) and credit (long or short) 5.Hedge funds might utilize so much leverage for arbitrage as opposed to other strategies because it is effective in increasing passive income than other strategies. By using the leveraging, the person will have increased his wealth compared to other risky strategies. 6.Hedge funds long credit use leverage in many ways. The security is purchased on margin using borrowed funds from a broker then trades on margin to amplify gains (Grill, Schmedders, Kubler and Brumm 2017). An example is where one borrows on martin to boost magnitude/bet on their investment. For example, the hedge fund might raise $100 million and proceed to borrow extra 400 million dollars to boost the size of investment. 7.Rehypothecation implies the utilization of financial collateral by the takers as security for individual obligations to certain third party that is onward pledging (Claessens and Ratnovski 2014). The size of the global rehypothecation stood at $1.6 trillion according to Manmohan Singh in 2007. References Claessens, S. and Ratnovski, L., 2014. What is shadow banking? (No. 14-25). International Monetary Fund. Fuhrer, L., Guggenheim, B. and Schumacher, S., 2016. Re?Use of Collateral in the Repo Market. Journal of Money, Credit and Banking, 48(6), pp.1169-1193. Grill, M., Schmedders, K., Kubler, F. and Brumm, J., 2017. Re-use of Collateral: Leverage, Volatility, and Welfare. In 2017 Meeting Papers (No. 697). Society for Economic Dynamics. Keller, J., Bouveret, A., Picillo, C., Liu, Z. and Mazzacurati, J., 2014. Securities financing transactions and the (re) use of collateral in EuropeAn analysis of the first data collection conducted by the ESRB from a sample of European banks and agent lenders (No. 06). European Systemic Risk Board. Wee, P., Trivedi, A., Volny, O., Qazi, E., d'Esterre, C., Ahn, S.H., Demchuk, A., Goyal, M., Hill, M. and Menon, B., 2015. Good collateral status and favorable clinical outcome in acute ischemic stroke: first systematic review and meta-analysis.