| 1. | a contract between a dealer, as a bank, and an investor, whereby the investor purchases securities with the promise that they will be bought back by the dealer on a designated date, for which the investor receives a fixed return. |
| 2. | a contract between a buyer and a seller whereby the seller agrees to repurchase the item sold after a specified length of time or amount of use. Abbreviation: RP |
| repurchase agreement n. A contract giving the seller of an asset the right or obligation to buy back the asset at a specified price on a given date. |
Repurchase Agreement - Repo
A form of short term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.
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 Commentary
Repos are classified as a money-market instrument. They are usually used to raise short-term capital.
Related Links
Money Market Tutorial
See also: Dollar Roll, Money Market, Reverse Repurchase, Share Repurchase
