reverse repurchase agreement(redirected from Reverse Repurchase Agreements)
Reverse Repurchase Agreement
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.
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reverse repurchase agreement
The purchase of an asset with a simultaneous agreement to resell the asset on a given date at a specified price. The result is simply a loan at a prescribed rate for a predetermined period while holding the asset as collateral. Also called reverse. Compare repurchase agreement.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.