Explanation

A repo (repurchase agreement) is correctly defined as:

"C. sale of a security with an agreement by the seller to buy it back at a specified price."

Key Points:

1. Repo Structure: In a repo transaction, one party sells securities to another party with a simultaneous agreement to repurchase them at a later date at a specified price.

2. Economic Function: Repos are essentially collateralized short-term loans. The seller (borrower) receives cash, and the buyer (lender) receives securities as collateral.

3. Why Other Options Are Incorrect:

   • Option A: Repos are not "publicly traded" securities in the traditional sense. While they are traded in financial markets, they are typically bilateral agreements rather than standardized publicly traded securities.
   • Option B: This describes a "putable bond" or security with a put option, not a repo agreement.

4. Repo Market Characteristics:

   • Commonly used by financial institutions for short-term funding
   • Typically involve government securities as collateral
   • Have maturities ranging from overnight to several months
   • The difference between the sale price and repurchase price represents the interest (repo rate)

5. Reverse Repo: The opposite transaction is called a "reverse repo," where one party buys securities with an agreement to sell them back.

This definition aligns with standard fixed income terminology and CFA curriculum content on money market instruments.