Collateral
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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.