Sec-lending haircuts and indemnification pricing
A pricing method for borrowed securities that includes haircut and indemnification is introduced
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In securities lending transactions, higher haircuts should lead to a lower cost of indemnification. Wujiang Lou presents a method for integrating haircut determination and indemnification pricing
An arbitrager or hedger wishing to take a short position in a security needs to borrow that security in order to sell it in the market. Market makers, no longer paid to
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