The “Price Differential” is most easily understood if we consider a Repurchase Transaction to be economically equivalent to a collateralised loan. In these circumstances, the “Price Differential” is the total AMOUNT OF INTEREST that has accrued with respect to the ‘loan’ made by the Buyer to the Seller.
More specifically, the “Price Differential” on any given day equals:
PR*PP*(n/360 (or 365))
“PR” is the “Pricing Rate” (in other words, the interest rate being charged on the money being ‘loaned’);
“PP” is the “Purchase Price” (in other words, the amount of the ‘loan’); and
“n” is the number of days from (and including) the Purchase Date to (but excluding) the date upon which the Price Differential is being calculated (or the Repurchase Date if this occurs earlier (i.e. the date upon which the ‘loan’ is repaid).
The “Price Differential” is a calculated field. As such, it is not found in the GMRA or in a confirmation for a specific Repurchase Transaction.Contact Us