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repurchase agreement Definition

re·pur·chase agreement (rē pʉr′c̸həs)

noun

an agreement to sell certain securities and then purchase them again on a specified date, usually within a few day, thereby serving the function of a secured loan that meets the short-term financing needs of both buyer and seller

  • repurchase
  • repurify
  • repursue
repurchase agreement Finance Definition
Often called a repo. An agreement in which a securities holder sells the securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. In effect, the buyer of the securities is lending the seller money. Dealers typically use this arrangement to finance their positions. Used in the context of the Federal Reserve, however, a repo refers to a situation in which the Fed lends money and increases the reserves of banks. Typically, this is done in an overnight transaction, but there are term repos that last for different time periods.