tagasiostuleping

Tagasiostuleping is an Estonian legal term that translates to a repurchase agreement or a repo. It is a form of short-term borrowing, primarily for dealers in government securities. In a typical repo transaction, one party sells securities to another and agrees to repurchase them at a later date at a specified price. This effectively acts as a collateralized loan. The seller of the securities is borrowing money, and the securities serve as collateral. The difference between the sale price and the repurchase price represents the interest on the loan. These agreements are crucial for managing liquidity in the financial markets. They allow financial institutions to obtain short-term funding or to invest surplus cash for a short period while holding safe assets. The terms of a repo agreement, including the securities involved, the price, and the repurchase date, are clearly defined in the contract. Repo markets are vital for the smooth functioning of monetary policy and for the broader financial system.