Enter Values

$
Settlement amount ($1K - $1B)
days
1 to 365 days
%
Annualized rate (0% - 50%)
Bond Details
Quoted price (50 - 200)
Per 100 face value (0 - 10)

Quick Reference

  • Spot Transaction: Outright sale at dirty price
  • Forward Transaction: Repurchase at higher forward price
  • Implicit Rate: Repo rate embedded in price differential
  • Settlement: Based on dirty price (clean + accrued)
Ryan O'Connell, CFA
Calculator by Ryan O'Connell, CFA

Results

Sell/Buy-Back
Trade Inception
Dirty Price (Start) 101.0000
Nominal Amount $9,900,990.10
Interest Calculation
Repo Interest $41,666.67
Termination Money $10,041,666.67
Forward Prices
Forward Dirty Price 101.4208
Forward Clean Price 100.4208

Classic Repo vs Sell/Buy-Back

Aspect Classic Repo Sell/Buy-Back
Repo Rate Explicit (stated) Implicit (in price)
Interest/Return $41,666.67 $41,666.67
Termination Amount $10,041,666.67 $10,041,666.67
Coupon During Term Returned on payment date Rolled into forward price
Legal Agreement GMRA standard Often none (higher risk)

Both structures produce identical economic outcomes - the same funding cost for the same term.

Formula Breakdown

1
Dirty Start Price = Clean Price + Accrued (per 100)
= 100.0000 + 1.0000
= 101.0000
2
Nominal = Principal / (Dirty Price / 100)
= $10,000,000 / (101.0000 / 100)
= $9,900,990.10
3
Repo Interest = Principal x Rate x (Days / Basis)
= $10,000,000 x 0.0500 x (30 / 360)
= $41,666.67
4
Termination Money = Principal + Repo Interest
= $10,000,000 + $41,666.67
= $10,041,666.67
5
Forward Dirty Price = (Termination / Nominal) x 100
= ($10,041,666.67 / $9,900,990.10) x 100
= 101.4208

Model Assumptions

  • Day count: Actual/360 for USD/EUR repo interest (standard money market convention)
  • No coupon during term: Calculator assumes no coupon payment during the repo term
  • No margin/haircut: Base calculation excludes initial margin
  • Flat repo curve: Single repo rate for the full term
  • Educational purposes: Not financial advice. Verify with Bloomberg BSR screen.

Understanding Sell/Buy-Back Transactions

What is a Sell/Buy-Back?

A sell/buy-back is a pair of outright transactions executed simultaneously: a spot sale of securities today and a forward repurchase at a higher price on a future date. Unlike classic repo where the interest is stated explicitly, the financing cost is embedded in the price differential between the two legs.

The economic outcome is identical to a classic repo. Both structures provide secured financing where the seller (cash borrower) receives funds against collateral and agrees to repurchase the securities at a predetermined price.

How the Forward Price Embeds the Repo Rate

In a sell/buy-back, the forward price is calculated to include the financing cost that would otherwise be stated as an explicit repo rate:

Forward Price Formula
Forward Dirty Price = Start Dirty Price x (1 + Repo Rate x Days / Day Count Basis)

Implied Repo Rate = (Forward Price / Start Price - 1) x (Day Count Basis / Days)

The seller receives the start dirty price (clean price plus accrued interest) and agrees to buy back the bonds at the higher forward dirty price. The difference represents the implicit interest payment.

Classic Repo vs Sell/Buy-Back

Classic Repo

Explicit rate, same price
Repurchase at original price plus separate interest payment. Governed by GMRA with margin calls and close-out netting.

Sell/Buy-Back

Implicit rate, different prices
Forward price exceeds spot price by the embedded interest. Often no master agreement, no margin calls.

Coupon Handling During the Term

If a coupon pays during the repo term, the structures differ significantly:

  • Classic Repo: The coupon is returned to the seller immediately on the payment date (called a "manufactured dividend")
  • Sell/Buy-Back: The coupon is retained by the buyer, but the forward price is reduced to compensate. The adjustment includes: coupon amount plus repo interest on the coupon from payment date to termination
Coupon Adjustment: Forward Price = Base Forward - Coupon x (1 + Repo Rate x Days from Coupon to Term / Basis). This compensates the seller for the delayed receipt of the coupon payment.

Risk Considerations

Sell/buy-backs carry higher counterparty risk than classic repo due to the absence of standard protections:

  • No margin calls: If collateral value falls, the cash lender has no contractual right to demand additional securities
  • No close-out netting: Without a master agreement like GMRA, default scenarios are more complex
  • Legal uncertainty: In some jurisdictions, the outright sale structure may create ambiguity about ownership rights
Best Practice: For significant exposures, consider using a documented sell/buy-back under the GMRA 2000/2011 Annex I, which provides margin mechanics and close-out netting while preserving the sell/buy-back economic structure.
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Frequently Asked Questions

A sell/buy-back repo is a pair of outright transactions: a spot sale of securities and a simultaneous forward purchase at a higher price. Unlike classic repo where securities are repurchased at the same price plus explicit interest, the repo rate is implicit in the price differential. The economic outcome is identical to classic repo.

In a classic repo, the repurchase price equals the original sale price, and interest is paid separately. In a sell/buy-back, the forward (buy-back) price is higher than the spot (sell) price, with the difference representing the embedded repo interest. Key differences: (1) repo rate is implicit vs explicit, (2) coupons are rolled into forward price vs returned immediately, (3) often no legal agreement vs GMRA standard.

The repo rate is implicit because it is embedded in the forward price rather than stated separately. The forward price is calculated as: Forward Dirty = Start Dirty x (1 + Rate x Days / Basis). You can back out the implied rate from the price differential: Rate = (Forward / Spot - 1) x (Basis / Days).

If a coupon pays during the term, it is rolled into the forward price rather than paid immediately. The forward price is reduced by the coupon amount plus compensation for the delayed receipt (coupon x repo rate x days from coupon to termination). This differs from classic repo where coupons are returned on the payment date as a "manufactured dividend."

Sell/buy-backs are common in markets without standard repo documentation (like GMRA) or where outright transactions are preferred for accounting purposes. They are also used when parties want to avoid the legal complexities of repo agreements, though this comes with higher counterparty risk due to lack of margin calls and netting provisions.
Disclaimer

This calculator is for educational purposes only and does not constitute financial advice. The calculations assume simplified conditions (no coupon during term, no margin/haircut) and may not reflect actual market pricing. Always verify with professional trading systems like Bloomberg BSR before making trading decisions.

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