If ever there was a word that you’d expect to find in a Harry Potter novel, it’s re-hypothecation. This a classic example of financial people inventing impenetrable terminology to make their business look like a black art. “Oooh, re-hypothecation, it must be magic!”
Well it isn’t.
The term “re-hypothecation” came up a lot during the MF Global meltdown; It’s quite a common term in the securities market – but what does it mean?
To explain re-hypothecation, we have to explain hypothecation. And hypothecation is pretty simple. It’s when you lend someone money and let the borrower keep the collateral.
Re-hypothecation: How it’s related to MF Global
Marketplace Jan 4, 2012