Pension transactions are generally considered to be a reduction in credit risk. The biggest risk in a repo is that the seller does not maintain his contract by not repuring the securities he sold on the due date. In these cases, the purchaser of the guarantee can then liquidate the guarantee in an attempt to recover the money he originally paid. However, the reason this is an inherent risk is that the value of the warranty may have decreased since the first sale and therefore cannot leave the buyer with any choice but to maintain the security he never wanted to maintain in the long term, or to sell it for a loss. On the other hand, this transaction also poses a risk to the borrower; If the value of the guarantee increases beyond the agreed terms, the creditor cannot resell the guarantee. > difference between the sale price and the purchase price, listed as a separate reseal rate > coupon or dividend that the buyer immediately transmits to the seller of the securities loan, also participates in the hedging, arbitrage and questionable credit transactions. In all of these scenarios, the benefit to the securities lender is either to obtain a low return on the securities currently held in its portfolio, or to possibly cover cash requirements. A pension purchase contract (repo) is a form of short-term borrowing for government bond traders. In the case of a repot, a trader sells government bonds to investors, usually overnight, and buys them back the next day at a slightly higher price. This small price difference is the implied day-to-day rate. Deposits are generally used to obtain short-term capital. They are also a common instrument of central bank open market operations. In order to reduce counterparty risk, investment fund managers can take several steps.

First, it is necessary to implement the criteria for selecting counterparties. That is, to ensure that the counterparty meets the minimum payment requirements. In practice, termination clauses are included if the solvency does not meet these requirements during the contract. Secondly, it is also necessary to use criteria for the selection of guarantees. The aim is to guarantee the quality of the assets as collateral and their liquidity. This is a problem when there is massive redemption by the participants. When the securities are lent, the fund must have sufficient liquidity to pay them all at the same time. It is therefore essential to at least guarantee the equivalence of liquidity between collateral and borrowed securities. It should be noted that the two instruments can be combined and used one after the other, as shown in Figure 8; Instead of going directly to the repo market, traders may, first, go to the securities credit market to exchange securities or shares for securities that are easier to finance on the repo market, such as government bonds, and, secondly, to go to the pension market to exchange government bonds received for cash.

Chart 7: Comparison of pension and credit instruments on securities Chart 8: Illustration of a financing agreement combining debt of securities and repo. One of the keys to these operations is that they have a short-term duration. There may be buybacks that happen overnight.