Reverse repurchase agreement: Difference between revisions
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(Reverse repo). A form of secured lending - seen from the perspective of the | (Reverse repo). | ||
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. | |||
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 borrower repays their borrowing by giving (more) cash back to the lender at maturity, in exchange for receiving back (repurchasing) the same securities. | ||
A reverse repo is exactly the same transaction as a Repurchase agreement (repo). | A reverse repo is exactly the same transaction as a Repurchase agreement (repo). | ||
But the reverse repo is viewed from the perspective of the | But the reverse repo is viewed from the perspective of the lender (rather than the perspective of the borrower). | ||
== See also == | == See also == | ||
* [[Repurchase agreement]] | * [[Repurchase agreement]] | ||
Revision as of 09:03, 20 May 2013
(Reverse repo).
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.
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.
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).
