Liquidating illiquid collateral 40 singlesdating
The speculative hedge fund Long Term Capital Management (LTCM) saw spectacular losses and required massive bail outs in 1998.
Prior to that it was able to obtain practically next-to-zero haircuts as its trades were considered safe by its lenders.
Illiquid assets may also be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset.
Additionally, a company may be deemed illiquid if it is unable to obtain the cash necessary to meet debt obligations.
Over five days, participants will gain an authoritative overview of the critical players and institutions that shape the market and develop key valuation and risk management techniques.In other words, a 00 treasury bill will be accepted as collateral for a 0 loan, while a 00 stock option might only allow a 0 loan. Haircut plays an important role in many kinds of trades, such as repurchase agreements (referred to in debt-instrument finance as "repo" but not to be confused with the concept of repossession denoted by that term in consumer finance) and reverse repurchase agreements ("reverse repo" in debt-instrument finance).In popular media, "haircut" has been used to denote a financial loss on an investment, as in "to take a haircut" (to accept or receive less than is owed.) Especially following the financial crisis of 2008, the term was popular in political debates surrounding the propriety of various government actions in response to the crisis.While the OCC recognizes that, if properly structured, ABL loans can be profitable, fully collateralized and, in fact, low-risk, it also emphasizes that the administration and monitoring of ABL portfolios can be very time- and cost-intensive for banks and are particularly susceptible to borrower fraud.The OCC identifies credit risk, operational risk, compliance risk, strategic risk and reputation risk as the primary risks associated with ABL.
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On March 27, 2014, the Office of the Comptroller of the Currency (OCC) issued a new handbook “Asset-Based Lending,” which provides guidance to federal bank examiners, national banks and federal savings associations The new handbook provides a detailed overview of the inherent risks and advantages of asset-based lending and discusses prudent risk management guidelines and regulatory expectations.