Building society and Haircut: Difference between pages
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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. | |||
==See also== | '''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 == | |||
* [[Collateral]] | |||
* [[Repurchase agreement]] | |||
* [[Bilateral repurchase agreement]] | |||
* [[Margin]] | |||
* [[Tri-party repurchase agreement]] |
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.