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What is a Repurchase Transaction?
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It is a trading method which includes that a T-bond holder, when selling a sum of T-bonds, reaches an agreement with the acquirer to rebuy this sum of T-bonds at an agreed price on a certain day of maturity. This transaction is called positive repurchase of T-Bonds.
Another situation thinkable is that an investor, when purchasing T-bonds, reaches an agreement to resell to the original vendor: at the agreed price and on a certain day of maturity in the future. This procedure then is called reverse repurchase of T-bonds. Both of these transactions are collectively called ˇ°T-bond repurchaseˇ±. A complete trade of T-bond repurchases is made up of two transactions, with both, time and price of the second transaction being agreed upon when the first transaction takes place.
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