Collateral
FRM Part 1 glossary · Financial Markets And Products
Definition
Assets or cash pledged to reduce a lender’s or derivatives counterparty’s loss if the pledgor defaults.
Collateral in plain English
Collateral reduces current exposure but introduces valuation, liquidity, operational, and wrong-way-risk considerations.
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Practice Collateral
What happens if a futures trader fails to meet a variation margin call in a timely manner?
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