Haircut: Difference between revisions
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imported>Doug Williamson (Add link.) |
imported>Doug Williamson (l) |
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'''Example''' | '''Example 1''' | ||
Market value of the asset = £100,000. | Market value of the asset = £100,000. | ||
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'''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.
