In a repo transaction, one party sells an asset to another party with the agreement to repurchase the asset at a later date. The selling party is typically a financial institution that is looking to raise short-term capital, while the buying party is typically an investor looking for a higher yield on their investment.Repo transactions are typically considered to be low risk, as the asset is typically collateralized by another asset of equal or greater value.

However, there is always the risk that the selling party will not be able to repurchase the asset when the agreement expires, in which case the buyer would be entitled to keep the asset.Repo transactions can be a great way for investors to earn a higher return on their investment, while also providing a financial institution with the capital it needs to operate.

However, it is important to understand the risks involved before entering into a repo transaction.