Reverse repurchase agreement: Difference between revisions

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imported>Doug Williamson
m (Amended term - 20/5/13)
imported>Doug Williamson
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(Reverse repo).  
(Reverse repo, or RRP).  


A form of secured lending - seen from the perspective of the lender - using an agreement to buy securities at the start of the contract, and to sell them back at a pre-agreed price at a fixed future date.
A form of secured investing/lending, seen from the perspective of the investor/lender, using an agreement to buy securities at the start of the contract, and to sell them back at a pre-agreed price at a fixed future date.


The borrower receives cash at the start (in exchange for the transfer of the securities to the lender).


The borrower repays their borrowing by giving (more) cash back to the lender at maturity, in exchange for receiving back (repurchasing) the same securities.
The investor/lender invests cash at the start (in exchange for the transfer of pre-agreed securities).
 
At maturity the investor/lender receives their cash back with interest and sells the securities back to the borrower.
 
 
A reverse repo is exactly the same transaction as a Repurchase agreement (repo) but from the perspective of the lender (rather than the perspective of the borrower).
 
It could logically have been called a “re-sale agreement”.


A reverse repo is exactly the same transaction as a Repurchase agreement (repo).
But the reverse repo is viewed from the perspective of the lender (rather than the perspective of the borrower).


== See also ==
== See also ==
* [[Bilateral repurchase agreement]]
* [[Tri-party repurchase agreement]]
* [[Repurchase agreement]]
* [[Repurchase agreement]]
* [[Cash in the new post-crisis world]]
[[Category:Liquidity_management]]

Latest revision as of 13:30, 31 October 2016

(Reverse repo, or RRP).

A form of secured investing/lending, seen from the perspective of the investor/lender, using an agreement to buy securities at the start of the contract, and to sell them back at a pre-agreed price at a fixed future date.


The investor/lender invests cash at the start (in exchange for the transfer of pre-agreed securities).

At maturity the investor/lender receives their cash back with interest and sells the securities back to the borrower.


A reverse repo is exactly the same transaction as a Repurchase agreement (repo) but from the perspective of the lender (rather than the perspective of the borrower).

It could logically have been called a “re-sale agreement”.


See also