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David explains a repurchase agreement (repo transaction) as a secured loan where the borrower sells collateral (e.g., a bond) to the lender in exchange for cash. The lender, also known as the seller, promises to repurchase the collateral at a forward price in the near future (e.g., tomorrow). This transaction allows the borrower to borrow money against the collateral while agreeing to buy it back at a predetermined price.