A reverse repurchase agreement is also known as which term?

A reverse repurchase agreement, commonly referred to as a "matched sale," is a transaction where one party sells securities to another party with an agreement to repurchase those same securities at a later date for a predetermined price. This mechanism is typically used by financial institutions to manage short-term liquidity needs. By utilizing a matched sale structure, the seller is essentially borrowing cash against the collateral of the securities being sold.

This term accurately reflects the nature of the transaction, as it entails both the sale of securities and the simultaneous commitment to repurchase them. It is particularly relevant in the context of the money markets, where institutions engage in such agreements to balance their short-term funding requirements effectively.

In contrast, terms such as federal funds, arbitrage, and a Treasury sale do not define the nature of a reverse repurchase agreement. Federal funds refer to the reserves that banks lend to one another overnight, arbitrage involves taking advantage of price differentials in different markets, and a Treasury sale typically refers to the issuance of government securities. Thus, "matched sale" is the term that correctly corresponds to the mechanics of a reverse repurchase agreement.