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David explains repurchase agreements, or repo transactions, which are essentially secured loans. In this process, the borrower (also called the buyer) sells collateral, like a bond, to the lender (or seller) in exchange for cash. For instance, if the collateral is valued at $100, the borrower receives that amount. The borrower promises to repurchase the collateral shortly after, often the next day, effectively locking in a forward price. The subsequent day, the borrower buys back the collateral at this predetermined price, completing the transaction. This mechanism is crucial for short-term borrowing in financial markets.