RepoGeschäfte

RepoGeschäfte, also known as repurchase agreements, are a common tool in financial markets. They involve the sale of securities with a simultaneous agreement to repurchase them at a later date at a specified price. Essentially, it's a short-term loan collateralized by securities. The seller receives cash in exchange for the securities, and the buyer effectively lends cash, earning interest on the transaction. The repurchase price is higher than the sale price, with the difference representing the interest. These agreements are typically very short-term, often overnight or for a few days, though longer terms exist. RepoGeschäfte are crucial for money market participants, providing a flexible way to manage liquidity and obtain short-term funding. Central banks frequently use repurchase agreements as a monetary policy tool to influence interest rates and the money supply. For the seller, it's a way to raise cash without selling their securities outright. For the buyer, it's a low-risk investment due to the collateral involved. The terms of the agreement, including the securities involved, the sale price, the repurchase price, and the maturity date, are all clearly defined.