Reverse Repurchase Agreement

AAA

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.

INVESTOPEDIA EXPLAINS 'Reverse Repurchase Agreement'

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

RELATED TERMS
  1. Retail Repurchase Agreement

    An alternative to regular savings deposits. Under a retail repurchase ...
  2. Accelerated Share Repurchase - ...

    A specific method by which corporations can repurchase outstanding ...
  3. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities. ...
  4. Implied Repo Rate

    The rate of return that can be earned by simultaneously selling ...
  5. Dollar Roll

    A type of repurchase transaction in the mortgage pass-through ...
  6. Bond

    A debt investment in which an investor loans money to an entity ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  4. What is the relationship between modified duration and interest rates?

    Modified duration is a formula that measures the value of a bond in relation to changes in interest rates. Modified duration ... Read Full Answer >>
  5. How does inflation affect a company's short-term investments?

    Inflation marginally erodes a company's short-term investments. Short-term investments are typically ultra-safe liquid assets, ... Read Full Answer >>
  6. Other than my savings account, what other types of holdings compound my interest?

    Investors and savers can use the power of compounding interest to accumulate wealth over time. Unlike simple interest that ... Read Full Answer >>
Related Articles
  1. Options & Futures

    An Introduction To Structured Products

    Learn a simple way to bring the benefits of derivatives into your portfolio.
  2. Active Trading

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  3. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  4. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  5. Investing Basics

    Treasury Inflation-Protected Securities (TIPS)

    Treasury inflation-protected securities are treasury securities that make adjustments for inflation as reflected in the Consumer Price Index.
  6. Investing Basics

    What is the Coupon?

    In the financial world, “coupon” represents the interest rate on a bond.
  7. Retirement

    Facing Retirement? Look Beyond 100% Bonds

    Retiring doesn't mean putting all your money in bonds. There are two things to consider when it comes to be invested in bonds: growth and inflation.
  8. Mutual Funds & ETFs

    Is the PowerShares (PFEM) ETF a Good Bet Now?

    What you need to know if you are considering trading PowerShares Fundamental Emerging Markets Local Debt ETF.
  9. Mutual Funds & ETFs

    Anatomy of Emerging Markets Debt ETF (EMLC)

    This emerging market bond ETF offers a high yield, but there are dangers. Find out why.
  10. Trading Strategies

    How to Pick the Best Dividend Stocks

    Dividend stocks can make you rich, but you have to be patient.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center