Haircut: Difference between revisions
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imported>Doug Williamson m (Spacing 27/8/13) |
imported>Doug Williamson (Updated entry. Source ACT Glossary of terms) |
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An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset. | An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset. | ||
For example | For example: | ||
if the market value of the asset were £100,000 | |||
and the haircut was 2%, | |||
the maximum amount of the related secured loan would be £98,000 (= £100,000 LESS 2%). | |||
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The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset. | The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset. | ||
For example in this context a 50% haircut on Greek debt of EUR 200bn means a loss of EUR 100bn (= 50%) and a recovery of EUR 100bn. | For example in this context: | ||
a 50% haircut on Greek debt of EUR 200bn | |||
means a loss of EUR 100bn (= 50%) | |||
and a recovery of EUR 100bn. | |||
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A fee or commission, expressed as a percentage of the total value of the related transaction. | A fee or commission, expressed as a percentage of the total value of the related transaction. | ||
== See also == | == See also == | ||
* [[Collateral]] | * [[Collateral]] | ||
* [[Repurchase agreement]] | * [[Repurchase agreement]] | ||
* [[Bilateral repurchase agreement]] | |||
* [[Tri-party repurchase agreement]] | |||
Revision as of 16:17, 25 November 2014
1.
Secured lending.
An amount deducted from the current market value of an asset used as collateral, to calculate the maximum amount of a loan secured against that asset.
For example:
if the market value of the asset were £100,000
and the haircut was 2%,
the maximum amount of the related secured loan would be £98,000 (= £100,000 LESS 2%).
2.
The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset.
For example in this context:
a 50% haircut on Greek debt of EUR 200bn
means a loss of EUR 100bn (= 50%)
and a recovery of EUR 100bn.
3.
A fee or commission, expressed as a percentage of the total value of the related transaction.
