birgðamagn

Birgðamagn is the total value of assets pledged by a borrower to secure an obligation, such as a loan, line of credit, or derivative contract. The term, from Icelandic birgð (guarantee) and magn (amount), reflects its role as security for the lender in case of default. Collateral can include cash, government or high-quality corporate bonds, equities, real estate, or other liquid assets that meet eligibility criteria set by the lender or clearinghouse. The collateral requirement is often expressed as a percentage of the exposure and is commonly divided into an initial margin and maintenance or variation margin.

The birgðamagn serves to reduce credit risk for lenders and can influence borrowing terms, including interest rates and credit limits. Its management involves regular valuation of pledged assets, applying haircuts to reflect risk and liquidity, and requesting additional collateral if value declines or risk increases. In many markets, such as repurchase agreements and cleared derivatives, collateral is transferred to a custodian or posted to a designated account and is legally withheld or pledged for the duration of the obligation.

Eligible collateral must be sufficiently liquid and of high credit quality in order to be readily realizable if needed. Risks associated with birgðamagn include valuation risk, liquidity risk, and concentration risk if a large portion of collateral is tied to a single asset class or issuer. Proper management requires clear eligibility criteria, timely valuation, enforceable collateral arrangements, and mechanisms to address shortfalls.