Encyclopedia of Investment Terminology

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Repurchase Agreement

A repurchase agreement, also known as a REPO, works where a borrower uses some type of financial device as collateral for a loan. The borrower will have to sell that device to the lender in order to get a loan. The collateral will be held in custody during the entire course of the agreement. The lender can take away this collateral if the borrower does not pay back the loan.

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