Definition ∞ Assets pledged to secure obligations arising from derivative contracts. These assets act as a guarantee, reducing counterparty risk and ensuring that financial commitments can be met. The type and quality of assets accepted as security vary depending on the specific agreement and market rules.
Context ∞ In decentralized finance, the use of digital assets as security for synthetic assets and other derivatives is a rapidly growing area. Debates often address the volatility of digital security and the adequacy of liquidation mechanisms during extreme market movements. Future developments focus on improving risk management models and enhancing the stability of these secured positions.
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