In the context of securities lending, what is used as collateral?

In securities lending, the collateral used typically consists of financial assets that provide sufficient value to mitigate the risk associated with the lender not receiving their securities back. Cash and bonds are the most common forms of collateral, as they can be easily valued and secured.

Cash is often used because it provides immediate liquidity and can be easily managed and returned at the end of the lending period. Meanwhile, bonds can serve as stable and reliable collateral that is less volatile compared to equity instruments. They are generally seen as lower risk, ensuring that the lender maintains protection against the default risk of the borrower.

Options mentioning equity instruments or property are less common, primarily due to concerns over their valuation stability. Government guarantees might provide additional security in different financing scenarios but do not typically constitute direct collateral in securities lending transactions. Thus, the combination of cash and bonds effectively supports the lender's interests, making it the correct answer.