Reverse repurchase agreement

(Reverse repo). A form of secured lending - seen from the perspective of the borrower - using an agreement to sell securities now, and to buy them back at a pre-agreed price at a fixed future date.

The borrower receives cash now (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 borrower (rather than the perspective of the lender).

See also

• Repurchase agreement