sale and repurchase agreement
Repo is short for a repurchase agreement or a sale and repurchase agreement where one party sells a security to another party for cash and agrees to repurchase it on a specified date for a specified price. The interest rate implied from this "lending" transaction is the repo rate. They are commonly used in the financial markets for secured lending.
USA
repurchase agreement, Also known as a repo or sale and repurchase agreement.
Typically undertaken in the context of securities or mortgage loans, an arrangement under which a security, a loan or other asset is sold by Party A to Party B with a corresponding agreement by Party B to sell the asset back to Party A for a specified (higher) price. The assets are repurchased on a certain date or within a certain time period, usually within a year of the original sale so as to qualify for the safe harbor from the automatic stay in section 559 of the Bankruptcy Code. A repo is essentially a loan disguised as a sale, with the interest rate equal to the difference between the repurchase price and the original sale price. The seller is essentially the borrower and the buyer is essentially the lender in the transaction, holding the securities it has "bought" as collateral for the "loan."

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

Look at other dictionaries:

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  • repurchase agreement — n: a contract giving the seller of securities (as Treasury bills) the right to repurchase after a stated period and the buyer the right to retain interest earnings Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. repurchase agreement …   Law dictionary

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  • reverse repurchase agreement — reverse repurchase agreement, reverse repo A form of secured, short term investment in which a security is purchased with a simultaneous agreement to sell it back to the seller at a future date. The purchase and sales agreements are simultaneous… …   Financial and business terms

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