Reverse Repurchase Agreement

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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.

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