When variation margin attacks: Difference between revisions

When variation margin attacks (view source)

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 Imagine if your bank, by law, had to pay you out the cash value of any increase in your home’s value during the term of your mortgage. Nuts, right?
-Now had Archegos bought real shares using [[margin loan]]s from its [[prime broker]]s, they would ''not'' have ''had'' to pay out the cash value any asset appreciation. To be sure, they may well have ''willingly'' done so – margin lending is how [[prime broker]]s make their money, after all — but being ''able'' to lend money, and having to lend it money are quite different propositions, especially on the day the whole world is going to hell.<ref>It is fair to note that — with the possible exception of the vampire squid — [[Archegos]]’s brokers did ''not'' believe the world was going to hell, at least not until it was far too late. But the principle remains.</ref>
+Now had Archegos bought real shares using [[margin loan]]s from its [[prime broker]]s, the brokers would not have ''had'' to pay out the cash value any asset appreciation. To be sure, they may well have ''willingly'' done so – [[margin lending]] is how [[prime broker]]s make their money, after all — but being ''able'' to lend money, and having to lend it money are quite different propositions, especially on the day the whole world is going to hell.<ref>It is fair to note that — with the possible exception of the vampire squid — [[Archegos]]’s brokers did ''not'' believe the world was going to hell, at least not until it was far too late. But the principle remains.</ref>
 === A dissonance ===