Collateralization

In finance, collateral is a borrower's commitment of property to a lender as a means to secure against counterparty risk and ensure repayment of a loan.

Overcollateralization is used to define types of loan products where an asset value used as collateral on a loan exceeds the loan value. This is sometimes used by borrowers to reduce credit risk for the creditor and enhance the loan's credit rating.

See also DeFi.

References

1. Roche, Cullen O. 2011. ‘Understanding the Modern Monetary System’. http://ssrn.com/paper=1905625.
2. Ball, Laurence M. The Fed and Lehman Brothers: setting the record straight on a financial disaster. Cambridge University Press, 2018.