how does a reverse repurchase agreement work 
in a reverse repurchase agreement rrp or reverse repo a party sells securities to a counterparty with the stipulation that it will buy them back at a slightly higher price the agreement functions much like a collateralized loan the original seller engaging in a reverse repurchase agreement receives an infusion of cash while the original buyer engaging in a repurchase repo agreement essentially provides a loan and earns interest from the higher resale price in general the assets that serve as collateral for the transaction do not physically change hands 