Collateral

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.