Repurchase Agreement

In finance, the term repurchase agreement denotes an agreement to sell securities on the condition of buying those same securities back from the buyer at a predetermined later date.

The buyer, on the other hand, agrees to buy the securities and resell them to the seller at the predetermined date (a reverse purchase agreement).

The securities act as collateral for both parties in the agreement. The resulting transaction is known as a repo transaction.

Repurchase agreements are widely used by central banks to control the amount of base money in circulation.

See also: Swiss Reference Rates

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