reverse repurchase agreement

reverse repurchase agreement
reverse repurchase agreement, reverse repo
A form of secured, short-term investment in which a security is purchased with a simultaneous agreement to sell it back to the seller at a future date. The purchase and sales agreements are simultaneous but the transactions are not. The purchase is a cash transaction while the return sale is a forward transaction since it occurs at a future date. Informally known as a reverse. The buyer/investor/lender earns interest paid at rate negotiated between the parties. Rates paid on reverse repos are short-term money market interest rates and are completely unrelated to the coupon rate paid on the instrument being purchased. Every transaction where a security is sold under an agreement to be repurchased is a repo from the seller/borrower's point of view and a reverse from the buyer/lender's point of view. Repos and reverses are often used to finance investment purchases, especially by traders. American Banker Glossary

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reverse repurchase agreement UK US noun [C] also INFORMAL reverse repo)
STOCK MARKET, FINANCE an agreement to buy bonds, shares, etc. and to sell them back later to the original seller at a higher price. A reverse repurchase agreement is the same as a repurchase agreement, but from the point of view of the buyer rather than the seller: »

A reverse repurchase agreement is a transaction in which funds are effectively loaned on a short-term basis.

Compare REPURCHASE AGREEMENT(Cf. ↑repurchase agreement)

Financial and business terms. 2012.

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Look at other dictionaries:

  • Reverse Repurchase Agreement — The purchase of securities with the agreement to sell them at a higher price at a specific future date. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the… …   Investment dictionary

  • repurchase agreement — ( RP) A form of secured, short term borrowing in which a security is sold with a simultaneous agreement to buy it back from the purchaser at a future date. The purchase and sales agreements are simultaneous but the transactions are not. The sale… …   Financial and business terms

  • repurchase agreement — Under Title 11 U.S.C. Section 101: (47) The term repurchase agreement (which definition also applies to a reverse repurchase agreement) (A) means (i) an agreement, including related terms, which provides for the transfer of one or more… …   Glossary of Bankruptcy

  • 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, where the… …   Financial and business terms

  • Repurchase Agreement - Repo — A form of short term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security (and agreeing to …   Investment dictionary

  • repositioning repurchase agreement — A funding technique often used by dealers who encourage speculation through the use of gains trading, pair off, when issued, and extended settlement ploys. When an investor agrees to purchase a security with the intent of quickly selling it for a …   Financial and business terms

  • Repurchase agreement — Better known as Repurchase agreements (RPs or repos), a Sale and Repurchase Agreement has a borrower (seller/cash receiver) sell securities for cash to a lender (buyer/cash provider) and agree to repurchase those securities at a later date for… …   Wikipedia

  • reverse repo — reverse repurchase agreement, reverse repo A form of secured, short term investment in which a security is purchased with a simultaneous agreement to sell it back to the seller at a future date. The purchase and sales agreements are simultaneous… …   Financial and business terms

  • Reverse repo — In essence, refers to a repurchase agreement. From the customer s perspective, the customer provides a collateralized loan to the seller. The New York Times Financial Glossary * * * reverse repo reverse repo ➔ repo1 * * * reverse repo UK US noun… …   Financial and business terms

  • reverse — An informal name for a reverse repurchase agreement. American Banker Glossary * * * ▪ I. reverse re‧verse 1 [rɪˈvɜːs ǁ ɜːrs] verb [transitive] 1. to change something such as a decision, judgement, or process so that it is the opposite of what it… …   Financial and business terms

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