Rehypothecation: Difference between revisions

Rehypothecation (view source)

Revision as of 18:12, 2 February 2021

37 bytes removed , 2 February 2021

no edit summary

Amwelladmin

Bureaucrats, Interface administrators, Administrators

82,938

edits

@@ Line 1: / Line 1: @@
-{{anat|pb|{{subtable|{{rehypothecation capsule}}}}}}''Compare with [[title transfer]]''
+{{anat|pb|{{subtable|{{rehypothecation capsule}}}}}}{{pbprov|Reuse}} — often labeled {{pbprov|rehypothecation}}<ref>Normal [[hypothecation]], by the way, is a term you don’t often see (and which means simply to [[pledge]] assets by way of [[security]] for a [[debt]]).</ref> — is the right a {{pbprov|prime broker}} has over its client’s {{pbprov|custody assets}} to take those assets and sell them in the market to offset its lending costs, against an obligation to return equivalent assets (which it must buy in the market) when the client wants them back.
-{{pbprov|Reuse}} — often labeled {{pbprov|rehypothecation}}<ref>Normal [[hypothecation]], by the way, is a term you don’t often see (and which means simply to [[pledge]] assets by way of [[security]] for a [[debt]]).</ref> — is the right a {{pbprov|prime broker}} has over its client’s {{pbprov|custody assets}} to take those assets and sell them in the market to offset its lending costs, against an obligation to return equivalent assets (which it must buy in the market) when the client wants them back.
 It is a fundamental part of a [[prime brokerage]] business. This is how a {{pbprov|prime broker}} funds its costs of lending to its Hedge Fund clients, which allows them to gain [[leverage]], buy the assets and conflate [[alpha]] with [[vega]]: it is ''not'' a [[credit risk mitigation technique]] (for that see {{pbprov|security}} and {{pbprov|margin}}.