Template:LOSD under synthetic pb

LOSB under Synthetic PB

For synthetic prime brokerage, it is common for the PB to pass on its stock borrowing costs (well: it is a synthetic equivalent of a stock borrow and a short sale, after all, so this makes sense). It does this by subtracting the prevailing borrow rate from the floating rate it pays under the swap. Therefore the Non-Hedging Party wears the ultimate cost of the expensive stock borrow, so there’s no real need to impose a Maximum Stock Loan Rate (though prime brokers will typically impose one as a matter of course).