Repurchase agreement: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Administrator (CSV import) |
imported>Doug Williamson m (Amended definition - 20/5/13) |
||
| Line 1: | Line 1: | ||
(Repo). | (Repo). | ||
The party buying securities | 1. 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 buying securities at the start of the contract is the lender, paying away cash at the start. | |||
The lender enjoys repayment of their loan by receiving cash back from the borrower at maturity, in exchange for the transfer of the same securities back to the borrower. | The lender enjoys repayment of their loan by receiving cash back from the borrower at maturity, in exchange for the transfer of the same securities back to the borrower. | ||
In the event of the borrower's default, the lender gets the (defaulted) loaned money back by selling the securities elsewhere in the market. | In the event of the borrower's default, the lender gets the (defaulted) loaned money back by selling the securities elsewhere in the market. | ||
2. Collateralised | |||
2. Collateralised borrowing using securities as the collateral (without legal transfer of the securities). | |||
== See also == | == See also == | ||
| Line 16: | Line 21: | ||
* [[Reverse repurchase agreement]] | * [[Reverse repurchase agreement]] | ||
* [[Security]] | * [[Security]] | ||
Revision as of 09:00, 20 May 2013
(Repo).
1. 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 buying securities at the start of the contract is the lender, paying away cash at the start. The lender enjoys repayment of their loan by receiving cash back from the borrower at maturity, in exchange for the transfer of the same securities back to the borrower.
In the event of the borrower's default, the lender gets the (defaulted) loaned money back by selling the securities elsewhere in the market.
2. Collateralised borrowing using securities as the collateral (without legal transfer of the securities).
