A replacement for collateral that is identical in terms of type, nominal value, description and amount to the one originally provided. Typically, as in repo transactions, the full title to collateral passes from one party to another, and the transferee (the party who obtained title) will be obliged to deliver back equivalent collateral. The lender is entitled to specify during the term of a loan, and upon occurrence of a corporate action affecting collateralized securities, the form of equivalent collateral the lender prefers to receive on termination of the loan. The form can also be specified in the legal agreement.
An equivalent collateral is also known as equivalent securities.
