Collateral

A word about credit risk mitigation Go Premium {{{2}}} Legal security: Mortgage • Pledge • Lien • Bailment Equitable security: Charge • fixed • floating | ABWOS | Equitable lien Credit risk mitigation: Title transfer | Guarantee | Letter of credit | Netting Friends and relations: Rehypothecation | Equivalent Documents: 1994 NY CSA | 1995 CSA | 1995 ISDA CSD (English law) Regulation: LPA 1925 | Financial Collateral Regulations | LPMPA 1994 Index: Click ᐅ to expand: Taking security Security Collateral Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

Financial Collateral Directive

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

• Security financial collateral arrangements and
• Title transfer financial collateral arrangements (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.

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.