Overview
A repurchase agreement (repo) is a transaction, where one party sells to the other party a group of assets, with the agreement to repurchase the assets at some later date at a pre-specified price. The party selling the assets typically provides collateral which is returned at the maturity of the repo. Legal title of the assets is transferred in the process, although for modeling purposes, the risk and benefits of the assets are retained.
The repo is typically priced so that the net effect of the agreement is a loan to the asset seller. That is, the repurchase price is higher than the initial price, generating a return for the asset buyer. In this context, a repo can be see to essentially be a loan that is secured by the assets that are sold, and any other collateral provided.