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REPO

A REPURCHASE AGREEMENT (REPO) is an agreement whereby a bank sells a broker/dealer a money market instrument, usually a T-bill, with the agreement to buy it back in a certain period of time for a specific (higher) price. Repurchase agreements are generally issued for overnight or up to 10 days, though some are issued for longer durations. There is no maximum duration for repurchase agreements.

The main players in repurchase agreements are: Broker/dealers make arrangements between buyers and sellers

Corporations either have money or need to borrow money

Banks may need money overnight to meet their reserve requirement, or,conversely, may have extra cash

The Fed probably the biggest player since it controls anenormous amount of cash invested for short-term investing The overnight repurchase agreements that are traded between banks are especially good because they: Have no interest-rate risk Have no market risk Pay interest equal to the Fed funds rate

Suggested Reading

- This course is designed as a beginner's guide for the warrants topic. Through this course, you will come to understand the basic concepts used by investors worldwide regarding warrants and factors that influence the price of a warrant. Additional, this course will give you the opportunity to learn how to determine whether a warrant is worth buying. As an introductory course about the warrants, it is presented in a simple and easy to use format, using examples and illustrations suitable for those with little to no prior knowledge or experience with the subject matter.

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