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Reverse Repo


A contract (short-term borrowing) which is made between a buyer and seller for the temporary purchase of securities, such as treasury bills. Under this contract, the buyer agrees to resell the same securities (or their equivalent) at a specified date and usually for a fairly lower price, depending on prevailing interest rates and the lapse of time between the initial purchase and resale.

A reverse repo involves reversing of the roles of the two parties to a repo. The repo lender seeks to earn interest on cash available at its disposal.

It is also called a reverse repurchase agreement.



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Banking is an integral part of the modern financial system and plays an important role in an economy. It basically involves the so-called intermediation (e.g., ...
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