SIE Exam Question 721: Answer and Explanation

Question: 721

Which of the following terms refers to a broker using securities in his or her possession, but owned by a customer, as collateral to raise a loan to cover a short position?

• A. Recapitalization
• B. Recollateralization
• C. Rehypothecation
• D. Securitization

Correct Answer: C

Explanation:

Rehypothecation refers to a broker using securities in his or her possession, but owned by a customer, as collateral to raise a loan to cover a short position.