Securities lending

A lender's or borrower's view of a securities loan, against non-cash collateral for a lending fee or against cash collateral reinvested above the rebate rate, with collateral required at the margin, the margin call, manufactured dividends and the annualised return on the loan.

Inputs

Side

Quantity

Price

Term (or expected term)Collateral

Rebate rate%

Reinvestment rate%

Margin%

Collateral held (0: as required)

Dividend in the term a share

CurrencyCurve

Curve: flat rate% cc

Results

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Methodology

Conventions

Cash collateral: the lender earns the reinvestment rate less the rebate paid to the borrower.
Non-cash collateral: the borrower pays a fee a year on the loan value.
Collateral required: margin × loan value; dividends in the term are manufactured to the lender.

References

ISLA GMSLA (2010)

Formulas

Cash collateral income: M L (r_reinvest − r_rebate) τ