Haircut
From ACT Wiki
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.
