An IMF paper published this month examines the extent to which collateralised lending is a good risk mitigation technique.

Laura Valderrama, the author, argues that temporary drops in the value of collateral can quickly turn into credit downgrades for cash borrowers. Valderrama says this raises the cost of issuing debt precisely when refinancing is necessary to satisfy margin calls. "If a margin call is not swiftly satisfied, the lender can terminate unilaterally the contract and seize the