The purchase of securities with an obligation to sell. In the course of this – certain securities – are bought today – for a period fixed in advance and – at the same time sold back at a price now agreed. – Similar to the sale of securities with a repurchase obligation (repurchase transactions), no economic sale usually takes place in the process. Such operations are therefore treated as collateralized financial transactions and recognized in the balance sheet to the extent of the cash collateral provided or received. Reverse repurchase agreements are recorded on a bank’s balance sheet as (collateralized) assets, while repurchase agreements are recorded as liabilities. – The central bank enters into such transactions as part of its open market operations; however, it is not in a short position (i.e., in the position of a counterparty that assumed risk by having an open position), as is the case with corresponding transactions between commercial counterparties. – See repo transaction, role mixing, banking, repurchase agreement, swap policy.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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