CoachA prime broker is the bank that finances a hedge fund’s securities portfolio: it lends cash against longs, lends securities for shorts, settles and holds the portfolio, and reports on it. Rehypothecation is the prime broker’s re-use of a client’s securities as collateral for its own borrowing, which is how it funds the loans it makes.
Examples
Example 6.13 (Fifty and twenty-five)
With and , : the call comes after a fall of a third. A professional client margined by its prime broker at and is called at , after a fall of 5.6%.