OIS fund.rate – which side pay xq@collateral#eg IRS

I think whoever accepting/receiving/holding the collateral would pay interest on the collateral. I think the same guy can also lend it out, perhaps overnight. Similar to a bank holding your deposit…

Consider cash collateral for simplicity…

The original owner of the collateral could earn a daily interest if deposited in a bank. When she pledges it as collateral, she is still entitled to the same interest income. Someone has to pay that interest.

Now consider a MBS or a bond. They all generate a periodic income, just like cash collateral.

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