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Dollar repurchase agreement
A contractual commitment under which an entity sells wholly-owned securities to another entity and both the seller and the buyer irrevocably agree that the seller will buy back the repo securities and the buyer will resell the securities at an agreed price and date.
(1) The purpose of the transaction is to obtain financing, generally for a very short period (overnight to a month), by transferring ownership of the securities used as collateral. The difference between the selling price and the redemption price represents the interest (repo rate).
(2) The term repurchase agreement and its synonyms are sometimes used to designate the transaction considered from the point of view of the seller, as opposed to a reverse repurchase agreement, which is a repurchase agreement considered from the point of view of the buyer.
(3) The expressions dollar repurchase agreement and dollar roll are used when the repo securities are mortgage-backed securities.
Translations
Synonyms and variations
- Buyback agreement
- Dollar roll
- Repo (fam.)
- Repo agreement (fam.)
- Repurchase agreement
- RP