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.

VIDEO

Loading the player...
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. Accelerated Return Note (ARN)

    A short- to medium-term debt instrument that offers a potentially ...
RELATED FAQS
  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 >>
Related Articles
  1. Investing Basics

    What's a Reverse Repurchase Agreement?

    A reverse repurchase agreement is the buyer side of a repurchase agreement (also called a repo).
  2. Options & Futures

    An Introduction To Structured Products

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

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  4. 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.
  5. 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.
  6. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  7. Investing

    Five Portfolio Moves For The Second Half

    After a relatively calm few months, market volatility is back. If you are an investor, we help you prepare your portfolio with these five portfolio moves.
  8. Bonds & Fixed Income

    Junk Bonds: Does High Yield Equal Extreme Risk?

    High-yield bonds present a lot of risks but do they outweigh the rewards? Here are some ETFs to consider, with caution.
  9. Economics

    How An Aging World Can Impact Your Portfolio

    It can be easy for investors to lose sight of longer-term, structural developments in favor of more ephemeral trends and fads in the financial markets.
  10. Investing News

    Greece or China: Which is the Bigger Worry?

    A look at Greece, China and other economic concerns, as well as how to invest given the current environment.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!