Implied repo rate
Implied repo rate (IRR) is the rate of return of borrowing money to buy an asset in the spot market and delivering it in the futures market where the notional is used to repay the loan. == Simplified closed form == I R R = ( InvoicePrice PurchasePriceOfBond − 1 ) ( dayBase daysToDelivery ) {\displaystyle IRR=\left({\frac {\text{InvoicePrice}}{\text{PurchasePriceOfBond}}}-1\right)\left({\frac {\text{dayBase}}{\text{daysToDelivery}}}\right)} where dayBase is 365 or 360 == Usage == === Determine the cheapest to deliver asset === To determine the cheapest bond in a basket of deliverable bonds against a futures contract, implied repo rate is computed for each bond; the bond with the highest repo rate is the cheapest.