A repurchase agreement (repo) which has no specific repurchase date. In other words, the term of an open-ended repo is not predefined, and therefore it has no end date. Open-ended repos allow banks and other financial institutions to buy securities without having to stick to a specified repurchase date. Either party to the agreement can terminate the agreement at any time (any business day) after the contract date, provided a notice to that effect is served within an agreed period of time. Open-ended repos, like ordinary repos, help investors and financial institutions to raise short-term capital. Due to the uncertainty associated with open-ended repos, their interest rates are commonly higher than ordinary repos. The risk premium arises from not knowing how long the agreement will remain in effect.
Open-ended repos are also known as open-ended repurchase agreements or open-ended RPs.
