Finance
Collateral
An asset pledged as security for a loan, which the lender can seize if the borrower defaults. Reduces lender risk and typically enables lower interest rates.
Biological Context
Nature's collateral: hostage mechanisms in mutualistic relationships. Acacia trees provide food and shelter to ants; the ants become dependent and must defend the tree to protect their investment. Each partner's investment serves as collateral for the other's cooperation.
Business Application
Collateral enables transactions that wouldn't otherwise occur by reducing counterparty risk. Real estate, inventory, and receivables commonly serve as business collateral. The quality and liquidity of collateral affects borrowing capacity and cost.