Rehypothecation: Difference between revisions

Rehypothecation is an important concept in [[collateral management]] - arguably more important than "[[hypothecation]]" which is a term you don't often see (and which as far as I know simply means to [[pledge]] assets by way of security for a debt). ''Re''hypothecation achieves the chimaerical effect of allowing a recipient of ''pledged'' collateral - ie collateral the recipient doesn't actually own, but simply possesses with a [[security interest]] - to sell that collateral outright in the market to a third party, provided it remains liable to return an indentical ("[[fungible]]") asset at the conclusion of the pledge. Challenging, you would think, because "[[nemo dat quod non habet]]" - you can't give title to something you don't yourself own. But somehow, under US law, one manages it. (nb the equivalent concept doesn't exist under [[common law]]).