What are the Types of Repo
A repo, used as an investment tool since 1980, is a transaction where a financial institution sells a security to an individual or corporate investor and buys it back at a predetermined price at a future date. A repo, also known as a repurchase agreement, is a sale transaction made with a commitment to buy back. The transactions covered by repos include debt securities issued by the Public Partnerships Administration and the Mass Housing Administration, treasury and bank bonds, securities traded on the exchange, government bonds, and debt securities traded on the stock exchange.
When the repo matures, the counterparty is paid in 2 different ways. One of the payments made with a receipt is calculated by adding interest to the current price over the elapsed time, while the other is calculated with an estimated value based on the repo's maturity, depending on current developments that will affect today's market conditions. The purchase and sale of securities between two real or legal persons, where the securities are bought and then bought back by the original owner at a determined time and price, is called a reverse repo. Besides reverse repo, there are also other types such as repo, fictitious repo, continuous repo, overnight repo, open repo, unsecured repo, and flexible repo.
