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Sagot :
A repo is basically a collateralized loan, whereas Fed funds are uncollateralized
What is collateralized loan?
Collateralized loan obligations are a type of securitization in which payments from many small and big business loans are pooled and distributed to different classes of owners in different tranches. A collateralized debt obligation (CLO) is a type of debt obligation.
The use of a valuable item as collateral to obtain a loan is known as collateralization. If the borrower fails to repay the debt, the lender may seize and sell the asset to make up the difference. Asset collateralization offers lenders with some protection against default risk.
Collateral is a valuable object used to secure a loan. Lenders' risk is reduced by collateral. If a borrower fails on a loan, the lender can seize and sell the collateral to recuperate its losses.
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