What are repurchase agreements? Are they Risky?

Question

I was interested if anyone knew what repurchase agreements were and if they are financially risky? What do they do? How do you make money off them? Is it risky? Is your money tied up?

Serious answers only!

Thanks.

Answer 1

A repurchase agreement is when one organization sells an asset to another, with either the right or the duty to buy it back under certain circumstances.  These do involve risk, both in the value of the underlying assets, and in the financial strength of the parties.