Repurchase agreement: Difference between revisions
imported>Doug Williamson (Link with Securities Financing Transaction Regulation page.) |
imported>Doug Williamson (Mend link.) |
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(Repo). | (Repo). | ||
1. | 1. ''Effective collateralisation by legal transfer of securities.'' | ||
A form of secured borrowing using a simultaneous agreement to: | A form of secured borrowing, using a simultaneous agreement to: | ||
(i) Sell securities at the start of the contract, and | (i) Sell securities at the start of the contract, and <br> | ||
(ii) Buy them back later at a pre-agreed (higher) price at a fixed future date. | |||
The party selling securities (usually bonds, gilts, treasuries or other government or tradable instruments) at the start of the contract is the borrower, receiving cash at the start and tied to an agreement to buy the securities back at a specified later date and price. | The ''party selling securities'' (usually bonds, gilts, treasuries or other government or tradable instruments) at the start of the contract is the ''borrower'', receiving cash at the start and tied to an agreement to buy the securities back at a specified later date and price. | ||
In the event of the borrower's default, the lender (party providing the cash to the borrower) can sell the collateralised security to recoup some or all of its investment. | In the event of the borrower's default, the lender (party providing the cash to the borrower) can sell the collateralised security to recoup some or all of its investment. | ||
A reverse repurchase agreement (reverse repo) is the mirror image of the repo transaction, from the investor/lender’s view – and could logically have been called a “re-sale agreement”. | A reverse repurchase agreement (reverse repo) is the mirror image of the repo transaction, from the investor/lender’s view – and could logically have been called a “re-sale agreement”. | ||
2. | 2. ''Collateralisation without legal transfer of securities.'' | ||
By extension, collateralised borrowing using securities as the collateral (without legal transfer of the securities). | By extension, collateralised borrowing using securities as the collateral (without legal transfer of the securities). | ||
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== See also == | == See also == | ||
* [[Bilateral repurchase agreement]] | * [[Bilateral repurchase agreement]] | ||
* [[Cash in the new post-crisis world]] | |||
* [[Closing leg]] | |||
* [[Global Master Repurchase Agreement]] | * [[Global Master Repurchase Agreement]] | ||
* [[Tri-party repurchase agreement]] | * [[Tri-party repurchase agreement]] | ||
* [[Collateral]] | * [[Collateral]] | ||
* [[Haircut]] | * [[Haircut]] | ||
* [[ | * [[Monetisation]] | ||
* [[Opening leg]] | |||
* [[Repo rate]] | |||
* [[Reverse repo rate]] | |||
* [[Reverse repurchase agreement]] | * [[Reverse repurchase agreement]] | ||
* [[RONIA]] | * [[RONIA]] | ||
* [[Securities Financing Transaction]] | |||
* [[Securities Financing Transactions Regulation]] | |||
* [[Security]] | * [[Security]] | ||
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[http://www.treasurers.org/node/8409 Repos - a sign of the times, ACT 2012] | [http://www.treasurers.org/node/8409 Repos - a sign of the times, ACT 2012] | ||
[http://www.treasurers.org/repos ACT briefing note:Practical steps to investing in Repos ] | [http://www.treasurers.org/repos ACT briefing note: Practical steps to investing in Repos ] | ||
[[Category:Liquidity_management]] | [[Category:Liquidity_management]] | ||
Latest revision as of 22:45, 7 July 2021
(Repo).
1. Effective collateralisation by legal transfer of securities.
A form of secured borrowing, using a simultaneous agreement to:
(i) Sell securities at the start of the contract, and
(ii) Buy them back later at a pre-agreed (higher) price at a fixed future date.
The party selling securities (usually bonds, gilts, treasuries or other government or tradable instruments) at the start of the contract is the borrower, receiving cash at the start and tied to an agreement to buy the securities back at a specified later date and price.
In the event of the borrower's default, the lender (party providing the cash to the borrower) can sell the collateralised security to recoup some or all of its investment.
A reverse repurchase agreement (reverse repo) is the mirror image of the repo transaction, from the investor/lender’s view – and could logically have been called a “re-sale agreement”.
2. Collateralisation without legal transfer of securities.
By extension, collateralised borrowing using securities as the collateral (without legal transfer of the securities).
See also
- Bilateral repurchase agreement
- Cash in the new post-crisis world
- Closing leg
- Global Master Repurchase Agreement
- Tri-party repurchase agreement
- Collateral
- Haircut
- Monetisation
- Opening leg
- Repo rate
- Reverse repo rate
- Reverse repurchase agreement
- RONIA
- Securities Financing Transaction
- Securities Financing Transactions Regulation
- Security
