Collateral
\kəˈlætərəl\
A form of security offered by a counterparty in an ongoing transaction, where the value of promised payments can vary due to external events.
Typically, collateral comes in the form secure assets which are held by a third party so that they are available if a counterparty is unable to meet its obligations. Collateral is common in longevity swap transactions and is also used in some buy-in transactions. In the context of longevity risk, collateral typically covers emerging experience as well as changes in the future view of longevity as these changes will typically result in changes to the value placed on future payments.