Reuse - PB Provision: Difference between revisions

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{{anat|pb}}
{{anat|pb}}
{{pbprov|Reuse}} — often, though misguidedly, labeled {{pbprov|rehypothecation}} — 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}} — 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 the prime brokerage business. This is how a {{pbprov|prime broker}} manages its costs of lending to funds to buy the assets: it is ''not'' a credit risk mitigation technique (for that see {{pbprov|security}} and {{pbprov|margin}}.
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}}.

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