Term Repurchase (Repo) Agreements (Transactions)
A repurchase agreement (repo) is a type of short-term loan that involves the sale of a security with an agreement to repurchase it at a later date at a higher price. The security is used as collateral for the loan, and the difference between the sale and repurchase prices is the interest paid on the loan. Repo agreements are typically used by financial institutions to raise short-term capital, and are also used by investors to borrow and lend securities.
History of Repurchase Agreements
Repurchase agreements have been used since the early 1900s, when they were used by banks to raise short-term capital. In the 1970s, the repo market began to expand, and by the 1980s, it had become a major source of short-term financing for banks and other financial institutions. Today, repurchase agreements are used by a wide range of investors, including hedge funds, mutual funds, and other institutional investors.
Comparison of Repurchase Agreements
|Type of Repo||Collateral||Maturity|
|Term||Cash or securities||1 week to 1 year|
|Open||Cash or securities||No fixed maturity|
Repurchase agreements are a type of short-term loan that involve the sale of a security with an agreement to repurchase it at a later date at a higher price. They are used by financial institutions to raise short-term capital, and by investors to borrow and lend securities. For more information on repurchase agreements, visit the websites of the Federal Reserve Bank of New York, the Securities and Exchange Commission, and the Financial Industry Regulatory Authority.
- Securities Lending
- Reverse Repurchase Agreements
- Repo Rate
- Repurchase Agreement Risk
- Repo Market
- Repo Haircut
- Repo Margin
- Repo Rate Swap
- Repo-Style Collateralized Loan Obligations
- Repo-Style Collateralized Debt Obligations