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Repurchase agreements, or repos, are crucial for funding banks and other market players. They involve one party selling a security to another party with an obligation to buy it back later at a set price. This essentially means the buyer is lending money to the seller with the security as collateral. The seller, or borrower, must repay the lender on the repurchase date to reclaim the security. Repos can be overnight or for a longer term, with the repurchase price higher than the selling price to include interest. The annualized percentage difference between prices is known as the repo rate, making repos attractive due to lower interest costs compared to bank loans.