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.
- Collateralized Debt Obligation (CDO)
- Interest Rate (IR)