bullish
The World's Most Important Market
SUMMARY
- A repurchase agreement (repo) is nothing else than a form of collateralized loan, where the cash borrower posts collateral (i.e. a security, for instance a bond) against its loan but he also agrees to repurchase the security back at the end of the agreement.
- The collateral “posted” by the cash borrower is basically a form of protection for the cash lender in the event that the borrower becomes insolvent - hence, repo is a secured or collateralized form of lending.
- The biggest repo markets in the world use bonds as collateral.
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