What is repo

Question

What is repo

Accepted Answer

Repo is a financial transaction where one party sells securities to another party with an agreement to buy them back at a later date.

Repo stands for repurchase agreement.
It is a short-term borrowing mechanism used by banks and other financial institutions.
The party selling the securities is known as the 'seller' or 'borrower', while the party buying the securities is known as the 'buyer' or 'lender'.
The interest rate on a repo transaction is known as the 'repo rate'.
Example: Bank A sells securities to Bank B for a specified period of time, with an agreement to buy them back at a later date for a slightly higher price.
Repo transactions are commonly used in the money markets to raise short-term funds.
Repo transactions can be either overnight or for a longer period of time, depending on the needs of the parties involved.

Accepted Answer

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.

What is repo

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