Haircut: Difference between revisions
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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. | ||
'''Example''' | |||
Market value of the asset = £100,000. | |||
Haircut = 2%. | |||
The maximum amount of the related secured loan would be: | |||
= £100,000 LESS 2% | |||
= £98,000 | |||
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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. | ||
'''Example''' | |||
Debt = EUR 200bn. | |||
Haircut = 50%. | |||
Then: | |||
Loss of EUR 100bn ( = 50% ). | |||
Recovery of EUR 100bn. | |||
Revision as of 15:16, 16 March 2015
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.
Example
Market value of the asset = £100,000.
Haircut = 2%.
The maximum amount of the related secured loan would be:
= £100,000 LESS 2%
= £98,000
2.
The amount of a loss (or an expected loss) on asset, as a percentage of the total value of the asset.
Example
Debt = EUR 200bn.
Haircut = 50%.
Then:
Loss of EUR 100bn ( = 50% ).
Recovery of EUR 100bn.
3.
A fee or commission, expressed as a percentage of the total value of the related transaction.
