Track 1 of 25

Foundations of borrowing against assets

What collateral is, what an advance rate does, and why a one dollar shortfall does not take one dollar to fix. Start here if a maintenance rate is a new phrase.

20 lessons

Mark a lesson complete and it is remembered here.

What collateral actually isCollateral is a promise the lender can act on without asking you first.6 min
Why a lender lends against securities at allLiquid collateral is the cheapest risk a lender can take, which is why the loan is easy to get.6 min
Advance rate versus market valueMarket value is what your shares are worth. The advance rate is how much of that the lender will count.6 min
What a haircut is, and why it existsA haircut is the discount between market value and lending value, and it is a price for time.6 min
The maintenance rate, and how it differs from the advance rateOne number decides what you can borrow. A different, lower number decides when you get called.7 min
Loan to value, and how to compute itOne ratio, computed the same way every time, tells you where you stand.5 min
Headroom, in dollars and in percentHeadroom answers how far things can move before something is required of you.6 min
What a margin call actually is, procedurallyA call is not a warning. It is a demand with a clock, and sometimes the clock is zero.7 min
The forced-sale multiple: why selling a dollar does not cure a dollarSelling collateral to fix a shortfall shrinks the collateral, so the cure costs more than the gap.8 min
Why concentration changes the advance rateThe same dollar of stock counts for less when it is a large share of the collateral.6 min
Beta without statisticsBeta is a multiplier on market moves, and multipliers work in both directions.6 min
Demand loans, and what payable on demand meansA demand loan has no maturity date, which means it can end whenever the lender decides.6 min
Variable rates: how index plus spread worksYour rate is two numbers added together, and each one moves for different reasons.6 min
Daily accrual, and why a monthly statement hides itInterest is computed every day, then summarised once a month, and the summary loses the detail.6 min
Act/360, and why the day count mattersDividing an annual rate by 360 instead of 365 makes the real rate slightly higher than quoted.6 min
What a rehypothecation clause isA rehypothecation clause lets the lender use your pledged assets for its own purposes.6 min
A securities-backed line versus a margin accountBoth borrow against securities, but they differ in what the money may be used for and who regulates the terms.7 min
A forced sale and a chosen sale are different tax eventsThe tax bill on a liquidation is set by lots and timing you no longer control.7 min
Why the lender sees your risk continuously and you do notThe lender runs on live data; you run on a monthly statement. The gap is the whole asymmetry.6 min
What to check on your own statementSix figures, pulled from documents you already have, reconstruct the position the lender sees.8 min

Educational only. Nothing in this track is investment, legal or tax advice, or a recommendation to enter into any transaction. Completion is stored in this browser and nowhere else.