A repurchase agreement, often called a repo, is a short-term borrowing arrangement where one party sells securities to another with the promise to repurchase them later at a higher price. This transaction allows the seller to obtain immediate cash while providing the buyer with a secure investment, as the securities serve as collateral. Repos are commonly used by financial institutions, such as banks and hedge funds, to manage liquidity and fund operations. They are typically very short-term, lasting from overnight to a few weeks, and play a crucial role in the broader financial markets by facilitating the flow of capital.