General
haircut
What does haircut mean?
The discount a lender slaps on collateral before lending against it. Post 10 million in bonds, get a 5% haircut, borrow against 9.5. The buffer protects the lender if the collateral tanks before they can sell it.
"Repo desk gave us a 7% haircut on the corporates, killed the carry trade."
Frequently asked questions
What does haircut mean in finance?
In finance, a haircut is a discount applied to an asset's value, or a forced loss taken on a position.
How do you use haircut in a sentence?
A trader might say, "The lender applied a 20% haircut to the collateral," meaning they valued it 20% below market.
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