A reverse repurchase agreement is a financial transaction where a party sells securities to another party with an agreement to buy them back at a later date. Alternatively known as a reverse repo or a matched sale-purchase agreement, this type of transaction is commonly used by financial institutions to manage their short-term liquidity needs.
However, there are several other names for reverse repurchase agreements that you may encounter in the financial industry. Here are a few of them:
1. Sale and repurchase agreements (SRAs)
SRAs are similar to reverse repos in that they involve the sale of securities with an agreement to repurchase them at a later date. The key difference is that SRAs are often used by non-financial institutions, such as corporations or governments, to manage their short-term cash needs.
A buy/sell-back agreement is another type of transaction where one party sells securities to another party with an agreement to buy them back at a later date. This type of transaction is often used in the securities lending market, where one party wants to borrow securities for a short period of time.
3. Securities lending
Securities lending involves the temporary transfer of securities from one party to another in exchange for a fee. The borrower of the securities will often use them to cover short positions or to facilitate trading in a particular security. Reverse repos can be considered a type of securities lending transaction.
4. Repo 105
Repo 105 was a term used to describe a type of reverse repo that was used by Lehman Brothers prior to the company`s collapse in 2008. The term came into the spotlight during the subsequent investigation into Lehman`s accounting practices.
In summary, reverse repurchase agreements are a common financial transaction used by banks and other financial institutions to manage their short-term liquidity needs. While they are often referred to as reverse repos or matched sale-purchase agreements, there are several other names that you may encounter in the financial industry. Understanding these different terms can help you navigate the complex world of financial transactions.