The sale comes with the agreement that the seller will repurchase the securities at a higher price.

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In October the group sent BofA a letter demanding that it repurchase the soured mortgage securities.

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If they sell bonds they do not own, then they can use a repurchase agreement to ensure that they will have the securities they have agreed to deliver in the future.

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Reverse repurchase agreements involve the sale by the Fed of securities from its portfolio with an agreement to buy the securities back at a slightly higher price at a later date.

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Initially, it described collective investment vehicles, often organised as private partnerships, that specialised in combining two investment techniques, short sales (borrowing a security and selling it in the hope of being able to repurchase it more cheaply before repaying the lender) and leverage (buying securities with borrowed money) in a way that reduced risk.

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Countries also are divided over the treatment of repurchase agreements, a form of short-term borrowing for dealers in government securities.

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He put a perverse twist on the repurchase trade, routinely used in the past to squeeze some additional income out of the Treasury securities that are traditionally on hand as part of normal business operations.

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Dimon also commented on mortgage repurchase payments saying he doesn't expect the bank to have to buy back any private-label mortgage securities.

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Some of the soured assets Beal purchased at fire-sale prices were residential mortgage-backed securities that were sold in deals in which banks made representations and warranties about loan quality and promised to repurchase those loans if the representations were no good.

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