Collateral: Difference between revisions

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[[Collateral]], as a abstract concept, is securities and cash a counterparty puts up as [[credit risk mitigation]]. <br />
{{a|glossary|}}{{anat|security}}
A [[collateral contract]] — an even more abstract concept — is a binding agreement which is collateral to — in other words it supports or gives a person a right to enter into a {{tag|contract}}. For example, certain forms of [[option]] — swaptions for example — are [[collateral contract]]s.
===[[Financial Collateral Directive]]===
In the context of the much, but fairly, maligned [[financial collateral directive]], note the distinction drawn between
*[[Security financial collateral arrangement]]s and
*[[Title transfer financial collateral arrangement]]s (which for the most part, aren’t really impacted by the directive, which is mainly about dealing with the painful details of perfecting security).
 
===[[Credit support]]===
[[Collateral]], as a abstract concept, is securities and cash a counterparty puts up as [[credit risk mitigation]] under a [[title transfer collateral arrangement]] or a [[pledged collateral arrangement]]. <br />
 
For example: a credit support annex. That’s a [[collateral]] arrangement.
 
===[[Collateral contract]]s===
A [[collateral contract]] — an even more abstract concept — is a binding agreement which is collateral to — in other words it supports or gives a person a right to enter into a [[contract]].  
 
For example: certain forms of [[option]] — swaptions for example — are [[collateral contract]]s.

Latest revision as of 13:30, 14 August 2024

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A word about credit risk mitigation

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Financial Collateral Directive

In the context of the much, but fairly, maligned financial collateral directive, note the distinction drawn between

Credit support

Collateral, as a abstract concept, is securities and cash a counterparty puts up as credit risk mitigation under a title transfer collateral arrangement or a pledged collateral arrangement.

For example: a credit support annex. That’s a collateral arrangement.

Collateral contracts

A collateral contract — an even more abstract concept — is a binding agreement which is collateral to — in other words it supports or gives a person a right to enter into a contract.

For example: certain forms of option — swaptions for example — are collateral contracts.