Definition
A tri-party repurchase agreement is a short-term funding arrangement where one party sells securities to another and agrees to repurchase them later at a higher price, with a third-party agent handling collateral custody, valuation, and settlement.
Why It Matters
Tri-party repo markets are central to liquidity in the financial system and can transmit stress quickly if confidence in collateral or counterparties drops.
Example
A dealer finances its inventory overnight through a tri-party repo using Treasuries as collateral.