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The risks and pricing of lending against shares

Updated : February 25, 2019 09:12 AM IST

The risk arises if there is a sharp fall in the price and liquidity of the shares, and the promoter cannot or does not top up collateral.
There is an adverse correlation risk that the lenders have to contend with – if the promoter were to face economic stress, the underlying share collateral value and liquidity would likely be stressed as well.
In Indian markets, while there is some equity option trading on exchanges, there isn’t adequate liquidity for these kind of odd strike prices and tenors for any reliable pricing.
The risks and pricing of lending against shares
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