0 if a bank rediscounts a debt instrument (= loan), it buys it from another bank before the date it would normally be paid back for less than the amount owed, after the other bank has already done this for the original lender:
1 the process of buying a debt instrument (= loan) for a lower price before the date it has to be paid back, for a second or third time:
rediscount facilities
the rediscount rate
Really the prime factor in the whole situation is the day-to-day rate and the rediscount rate.
Rediscount is a way of providing financing to a bank or other financial institution.
When there is low liquidity in the market, banks can generate cash by rediscounting short-term securities.
Banks may rediscount these short-term debt securities to assist the movement of a market that has a high demand for loans.
It lends money out at an artificially cheap rate (the rediscount rate) and conducts open market purchases.
