repurchase agreement (redirected from Repo (derivative))

Repurchase agreement

An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a collateralized short-term loan for which, where the collateral may be a Treasury security, money market instrument, federal agency security, or mortgage-backed security. From the purchaser's (customer's) perspective, the deal is reported as a reverse repo.

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repurchase agreement (RP)

The sale of an asset at the same time an agreement is made to repurchase the asset at a specified price on a given date. Essentially, this process involves taking out a loan and using the asset as collateral. Also called repo. Compare reverse repurchase agreement. See also overnight repo.

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Repurchase Agreement

A practice in which a bank or other financial institution buys securities with the proviso that the seller repurchases the same securities for an agreed-upon price on a certain day. Investors and financial institutions do this in order to raise short-term capital.

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repurchase agreement

An agreement to buy something back from the purchaser.This is encountered most often in two situations:(1) The thing purchased turns out to be less valuable than originally thought, such as when someone buys a promissory note, or a partial interest in a promissory note,and the obligor then defaults.(2) Especially with condominium units in facilities specializing in elder care, the seller of the units will agree to buy them back at a preestablished price if the owner dies or becomes so disabled as to require nursing home or similar care.

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Repurchase Agreement (Repo)

What Does Repurchase Agreement (Repo) Mean?

A short-term borrowing instrument for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the next day. For the sellers, who agree to repurchase the securities in the future, it is a repo; for the party on the other end of the transaction (buying the securities and agreeing to sell them in the future), it is a reverse repurchase agreement.

Investopedia explains Repurchase Agreement (Repo)

Repos are classified as money market instruments. They are used to raise short-term capital.

Related Terms:
• Commercial Paper
• Debt
• Liquidity
• Money Market
• U.S. Treasuries