What Is Collateral Value?

Collateral Value is the market value of anything used as collateral to support a loan. This can create issues with margin requirements; if the asset begins to lose value the borrower would need to supply additional assets to underpin their loans.

This was a large problem in the 2008 financial crisis as CDOs and other securities devalued and the already highly-leveraged firms were required to delever quickly and to raise more assets at a time when their capital was already in short supply.

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