What’s the repo market, and exactly why does it matter?

What’s the repo market, and exactly why does it matter? A repurchase contract (repo) is just a short-term guaranteed loan: one party offers securities to some other and agrees to repurchase those securities later on at an increased cost. The securities act as collateral. The difference between the securities’ initial cost and their repurchase cost may be the interest compensated regarding the loan, referred to as repo price. A reverse repurchase agreement (reverse repo) could be the mirror of the [...]