Definition for: Repo
A "repurchase agreement" or "repo" is a financial transaction in which a dealer in effect borrows money by selling securities and simultaneously agreeing to buy them back at a slightly higher price at a later time (typically the next day). The dealer invests the money paid for the securities, hoping to get a higher return than the dealer owes on the obligation to repurchase the securities. Repurchase agreements function in a way similar to a secured loan with the securities serving as collateral. .Dealers use repurchase agreements extensively to finance their positions.
