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Managing Derivatives Contracts : A Guide to Derivatives Market Structure, Contract Life Cycle, Operations, and Systems by Khader Shaik

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CHAPTER  11

Collateral Management

The collateral management function is an important function in the derivatives business. Collateralization is an essential tool used in counterparty credit risk management. It is used in a number of business areas including derivatives transactions, repurchase agreements, and securities lending.

After the Dodd-Frank Act and similar laws were passed in major derivative markets around the world, new and more stringent collateral management standards have been introduced. According to new regulations, all central counterparty (CCP) organizations (clearinghouses) are required to adapt to robust collateral management models to maintain economically strong clearing organizations. The laws also enforce higher collateral ...

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