CoachIn securities lending an owner transfers a security to a borrower against collateral, usually cash worth a little more than the security, and receives an equivalent security back on demand. The lender invests the cash and returns part of the interest to the borrower at the rebate rate: the difference between the market interest rate and the rebate is the borrow fee, the true price of the loan. A locate is a broker’s confirmation, obtained before a short sale, that the security can be borrowed in time for settlement; US rules require one (Chapter 16).
Voorbeelden
Example 6.9 (The carry of a short)
Interest rates are 4%. A widely held large stock lends at a fee of 0.25%: the rebate is 3.75%, and a short seller earns 3.75% a year on the proceeds. A stock in heavy demand lends at a fee of 15%: the rebate is , and the short seller pays 11% a year for the right to be short. In both cases the short also pays the lender every dividend the stock distributes.