Repurchase Agreement

"In a repo, one party sells an asset [...] to another party at one price and commits to repurchase the same or another part of the same asset from the second party at a different price at a future date or [...] on demand. If the seller defaults during the life of the repo, the buyer [...] can sell the asset to a third party to offset his loss. The asset therefore acts as collateral and mitigates the credit risk that the buyer has on the seller.

[...] the commitment of the seller to buy back the asset in the future means that the buyer has only temporary use of that asset, while the seller has only temporary use of the cash proceeds of the initial sale. Thus [...] it behaves economically like a collateralised or secured deposit (and the principal use of repo is in fact the secured borrowing and lending of cash).

The difference between the price paid by the buyer at the start of a repo and the price he receives at the end is his return on the cash that he is effectively lending to the seller. In repurchase transactions [...] this return is quoted as a percentage per annum rate and is called the repo rate. Although not legally correct, the return itself is usually referred to as repo interest".

Source: https://www.icmagroup.org/market-practice-and-regulatory-policy/repo-and-collateral-markets/icma-ercc-publications/frequently-asked-questions-on-repo/1-what-is-a-repo/