What Is a Reverse Repurchase Agreement?
There are actually two aspects of the problem with the repo agreement. It is from the perspective of the fund supplier, as opposed to the repurchase agreement. In the reverse repurchase agreement, the party buying the securities agrees to sell the securities they bought at the agreed price for the agreed period. From the perspective of the fund supplier, the reverse repurchase agreement is the reverse of the repurchase agreement.
Reverse repurchase agreement
Right!
- Chinese name
- Reverse repurchase agreement
- Foreign name
- Reverse repurchase agreements
- Object
- Fund provider
- Features
- Sell the securities it bought
- There are actually two aspects of the problem with the repo agreement. It is from the perspective of the fund supplier, as opposed to the repurchase agreement. In the reverse repurchase agreement, the party buying the securities agrees to sell the securities they bought at the agreed price for the agreed period. From the perspective of the fund supplier, the reverse repurchase agreement is the reverse of the repurchase agreement.
- A reverse repurchase agreement is that in order for a security holder (i.e., a security seller) to enter into a security transaction with a security buyer, it is stipulated in the signed contract that the seller must agree on a mutually agreed time after selling a security The price buys back the security and pays interest at an agreed rate. For buyers, this is a reverse repurchase agreement
- Use of reverse repurchase agreements
- Use the "reverse repurchase agreement" for short-term sales of government and federal agency securities and the "special issue market" developed from it. Under the traditional method, government bond dealers need to borrow securities from commercial banks at an interest rate of o.5%. It is often cheaper to obtain securities for short-term sales through reverse repurchase agreements. As a result, this sales method gradually developed, forming a new sub-market of the securities repurchase agreement market-the "special issue market". Securities transactions in the "special issue market" are beneficial to both parties to the transaction, as securities holders can obtain funds by negotiating with dealers at a lower cost than the securities repurchase agreement market [1] . The main impact is the potential for market risk, interest rate risk, and foreign exchange risk.