A repurchase agreement (repo) which has no specific repurchase date. In other words, the term of an open repurchase agreement is not predefined, and therefore it has no end date. Open repurchase agreements allow banks and other financial institutions to buy securities without having to stick to a specified repurchase date. Either party to the agreement could terminate the agreement at any time after the contract date. Open repurchase agreements, like ordinary repurchase agreements, help investors and financial institutions to raise short-term capital. Due to the uncertainty associated with open repurchase agreements, their interest rates are commonly higher than ordinary repurchase agreements. The risk premium arises from not knowing how long the agreement will remain in effect.
Open repurchase agreements are also known as open RPs or open repos.
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