What is repo in investment management?

In investment management, a repurchase agreement, or "repo," is a short-term borrowing mechanism where one party sells securities to another party with the agreement to repurchase them at a specified price on a future date. This instrument is typically used by financial institutions to manage liquidity and finance their operations. Repos are considered low-risk investments since they are secured by collateral, usually government securities. The difference between the sale and repurchase prices reflects the interest cost of borrowing.