Haircut: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Add link.)
imported>Doug Williamson
(l)
Line 6: Line 6:




'''Example'''  
'''Example 1'''  


Market value of the asset = £100,000.  
Market value of the asset = £100,000.  
Line 24: Line 24:




'''Example'''
'''Example 2'''
   
   
Debt = EUR 200bn.
Debt = EUR 200bn.

Revision as of 09:59, 12 August 2016

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 1

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 2

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.


See also