Reverse repurchase agreement: Difference between revisions
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A form of secured investing/lending, seen from the perspective of the investor/lender, using an agreement to buy securities at the start of the contract, and to sell them back at a pre-agreed price at a fixed future date. | A form of secured investing/lending, seen from the perspective of the investor/lender, using an agreement to buy securities at the start of the contract, and to sell them back at a pre-agreed price at a fixed future date. | ||
The investor/lender invests cash at the start (in exchange for the transfer of pre-agreed securities). | The investor/lender invests cash at the start (in exchange for the transfer of pre-agreed securities). | ||
At maturity the investor/lender receives their cash back with interest and sells the securities back to the borrower. | At maturity the investor/lender receives their cash back with interest and sells the securities back to the borrower. | ||
A reverse repo is exactly the same transaction as a Repurchase agreement (repo) but from the perspective of the lender (rather than the perspective of the borrower). | A reverse repo is exactly the same transaction as a Repurchase agreement (repo) but from the perspective of the lender (rather than the perspective of the borrower). | ||
Revision as of 13:20, 31 October 2016
(Reverse repo).
A form of secured investing/lending, seen from the perspective of the investor/lender, using an agreement to buy securities at the start of the contract, and to sell them back at a pre-agreed price at a fixed future date.
The investor/lender invests cash at the start (in exchange for the transfer of pre-agreed securities).
At maturity the investor/lender receives their cash back with interest and sells the securities back to the borrower.
A reverse repo is exactly the same transaction as a Repurchase agreement (repo) but from the perspective of the lender (rather than the perspective of the borrower).
It could logically have been called a “re-sale agreement”.
