Reverse Repurchase Agreement


DEFINITION of '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 transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.


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BREAKING DOWN 'Reverse Repurchase Agreement'

Repos are classified as a money-market instrument. They are usually used to raise short-term capital.

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  1. What is the primary use of reverse repurchase agreements?

    The Federal Reserve utilizes a reverse repurchase agreement as one of two instruments used for the primary purpose of offsetting ... Read Full Answer >>
  2. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  3. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    In a conventional repurchase agreement, or repo, the dealer is the borrower and takes on similar risks to borrowers in other ... Read Full Answer >>
  4. What tax implications are there for parties involved with a reverse repurchase agreement?

    A reverse repurchase agreement – sometimes referred to as a reverse repo – is the purchase of an asset with a simultaneous ... Read Full Answer >>
  5. What is the difference between a repurchase agreement and reverse repurchase agreement?

    A repurchase agreement, or repo, is a form of collateralized lending, while a reverse repurchase agreement, or reverse repo, ... Read Full Answer >>
  6. What are the main components of the Federal Reserve's balance sheet?

    Looking at the balance sheet of any central bank, including the Federal Reserve, is not like looking at the financials for ... Read Full Answer >>

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