A repurchase contract (repo) is just a short-term secured loan: one celebration offers securities to some other and agrees to repurchase those securities later on at an increased cost. The securities act as security. The difference between the securities’ initial cost and their repurchase cost could be the interest compensated in the loan, referred to as repo price.
A reverse repurchase agreement (reverse repo) could be the mirror of a repo deal. In a reverse repo, one celebration acquisitions securities and agrees to market them straight straight back for an optimistic return later on, frequently the moment the following day. Many repos are immediately, though they could be much much longer.
The repo marketplace is essential for at the least two reasons:
- The repo market enables institutions that are financial have plenty of securities ( e.g. 阅读更多