REPURCHASE AGREEMENT Meaning and
Definition
-
A repurchase agreement, commonly known as a repo, is a short-term financial contract between two parties, usually a seller and a buyer, which involves the sale and subsequent repurchase of a specific asset, typically a security or a bond. In this arrangement, the seller sells the asset to the buyer at an agreed-upon price, with the understanding that the transaction will be reversed at a predetermined future date, known as the repurchase date.
The main purpose of a repurchase agreement is to provide short-term liquidity to the seller, as they can sell their assets to the buyer and receive cash in return. Simultaneously, the buyer obtains temporary ownership of the asset and earns interest for lending money to the seller.
The specific terms of a repurchase agreement include the repurchase date, the repurchase price (which is higher than the initial sale price to incorporate the interest earned), the interest rate, and any underlying collateral, such as the asset being sold. These agreements are commonly used by financial institutions, such as banks and money market funds, as a means to manage their short-term cash flows and investments.
Overall, repurchase agreements play a vital role in facilitating short-term borrowing and lending in the financial market, helping institutions effectively manage their liquidity needs while earning interest on their surplus cash.
Common Misspellings for REPURCHASE AGREEMENT
- eepurchase agreement
- depurchase agreement
- fepurchase agreement
- tepurchase agreement
- 5epurchase agreement
- 4epurchase agreement
- rwpurchase agreement
- rspurchase agreement
- rdpurchase agreement
- rrpurchase agreement
- r4purchase agreement
- r3purchase agreement
- reourchase agreement
- relurchase agreement
- re-urchase agreement
- re0urchase agreement
- repyrchase agreement
- rephrchase agreement
- repjrchase agreement
- repirchase agreement
Etymology of REPURCHASE AGREEMENT
The word "repurchase agreement" originated from a combination of two terms: "repurchase" and "agreement".
"Repurchase" comes from the Latin prefix "re-" meaning "back" or "again", and the Latin word "purchasare", meaning "to purchase". It refers to the act of buying something again or getting something back that was previously sold.
"Agreement" is derived from the Latin word "agreementum", which means "act of agreeing". It denotes a mutual understanding or contract between two or more parties.
When combined, "repurchase agreement" refers to a contract or arrangement in which one party sells a security or asset to another party with the simultaneous agreement to repurchase it at a later date and at a predetermined price.
Infographic
Add the infographic to your website:
