Repurchase Agreement - Repo
Categories: Trading
The basic structure goes like this: you sell a security to someone, but as you make the sale, you promise to buy it back at some point in the future. It may seem a little pointless, but it functions like a loan. You are borrowing money from the person you sold the security to, with the security acting as collateral. You then pay it back, getting your security returned to you as the deal closes.
In practice, repos typically happen in very short time intervals, including overnight transactions. Also, the securities involved are often short-term government securities, like T-bills.
The government uses this method to provide liquidity to markets, with the Federal Reserve acting as a major repo purchaser.
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Finance: What is Repo/Repossession?8 Views
Finance a la shmoop. What is repo or repossession? Well this is possession yes [Crazy looking woman in bed]
the devil spirit inhabits your body you need an exorcism.. Yeah right just bring [Priest waving a cross at the woman]
the PC, well this is a repossession like when you take your body, you know back
from the devil thank you very much. Well the same thing goes for things you buy [Woman becomes normal again]
like a car you could have and should have bought that very old but in good
working condition Saturn with the passenger-side dent in the shape of an [Girl walking away from the car]
ice cream truck you know that cost five grand. You could have paid for all of it
out of your piggy bank and had no debt but no you had to have the Audi a7 with [Piggy bank smashes]
the smartphone integration night vision and squirrel detection feature... That Audi [Squirrel detected in night vision]
cost 30 grand even though it was used and after you put the five grand down [Stacks of money]
you swore with your hand on your chest after signing promising documents 18
times that you'd pay 500 bucks a month for about five years until that car was [Woman signging the contract]
fully paid for but lo and behold you got fired from your job yeah, didn't plan [Woman looking angry walking out of her office]
on that when you swore. You whine about it to your car loan robot and it asks in
automated robot fashion why is that my problem so you go a month and then [Guy with a robot face]
another and then another without paying and the nasty gram letters come from
lawyers and from the bank and you know your credit is being destroyed but you [Final warning letters arriving]
can't find a job in a tough economy yeah you really shouldn't have majored in [Woman watching the news with ice cream and crisps]
French lit so then one day along comes Emilio Estevez in the middle of the
night with a thing that looks like a special clothes hanger and a few other [Emilio holding a clothes hangar next to the car]
tools and at 2:00 a.m. you hear your car is starting in the
driveway as it magically drives away do you call the cops [Emilio drives the car away]
you go downstairs to investigate and find a little note that says your car
has been repossessed and you have a little bill there for back payments of [Total costs being calculated]
three grand as well as the repossession fees of another grand and for a tidy
four grand in change with interest accruing every month you'll one day be
able to buy yourself out of your credit hole at least to some [Woman pops her head out the dirt and money flies out the hole]
extent they'll be a scar a blotch on your record like that d- you've got in
physics and yeah it's a bummer going through life with no Visa Amex or [Woman holding up sign on the side of the road for credit]
MasterCard shoulda bought that Saturn.. Welcome to repossession hell [Guy has horns on his head]