A practice in which a
bank or other
financial institution
buys securities or another
asset with the proviso that it will resell these same securities or asset to the same seller for an agreed-upon price on a certain day (often the next day).
Investors and financial institutions do this in order to raise short-term
capital. Indeed, it is the equivalent of a
short-term loan with the securities or asset serving as
collateral. A reverse repurchase agreement is the same as a
repurchase agreement, but from the perspective of the
buyer rather than the
seller. It is also called a matched sale transaction or simply a reverse.