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Home > QFINANCE Dictionary > Definition of haircut

Definition of

haircut

  • 1. Finance

    difference between loan amount and value of collateral the difference between the market value of a security and the amount lent to the owner using the security as collateral

  • 2. Stockholding & Investments

    estimate of investment loss an estimate of possible loss in investments

haircut - Related Articles
  • Managing Liquidity Risk in a Financial Institution: The Dangers of Short-Term Liabilities

    Best Practice

    The loan amount is typically less than the value of the security by a percentage haircut, which can be quite small for government securities or quite large for very risky securities.
    By David Shimko

  • How the Settlement Infrastructure Is Surviving the Financial Meltdown

    Best Practice

    At the same time, the valuation of securities taken as collateral are subject to “haircuts” (when securities of higher risk are valued lower than their market value), which reflect the rating, volatility, and liquidity of the paper.
    By Yves Poullet

  • Understanding the Risks and Opportunities in Recession-Hit Markets

    Viewpoints

    This would entail forcing haircuts on bank equity-holders and Tier 1 subordinate lenders, who, after all, are just one step up from holders of the organization’s common stock. This was all supposed to be risk capital anyway, so it is fair to call on it. That would create sufficient confidence to halt
    By Keith Guthrie

  • Formulating a Contingency Funding Plan to Manage Liquidity Risks

    Best Practice

    to draw down on precommitted lines; increased “haircuts” and collateral calls; increased utilization of credit commitments; currency conversion issues. According to the European Central Bank’s (2008) report “EU banks’ liquidity stress testing and contingency funding plans,” institution-specific assumptions
    By Gary Deutsch

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Definitions of ’haircut’ and meaning of ’haircut’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’haircut’ and other financial terms with our online QFINANCE Financial Dictionary.

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