Editing Repurchase agreement (section)

== Ambiguity in the usage of the term repo ==
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The term ''repo'' has given rise to a lot of misunderstanding: there are two types of transactions with identical cash flows:

: (i) a ''sell-and-buy-back'' as well as,
: (ii) a collateralized borrowing.

The sole difference is that in (i) the asset is sold (and later re-purchased), whereas in (ii) the asset is instead pledged as a collateral for a loan: in the ''sell-and-buy-back transaction'', the ownership and possession of ''S'' are transferred at t<sub>N</sub> from a ''A'' to ''B'' and in t<sub>F</sub> transferred back from ''B'' to ''A''; conversely, in the collateralized borrowing, only the possession is temporarily transferred to ''B'' whereas the ownership remains with ''A''.