Haircut

What does it Mean? 1. The difference between prices at which a market maker can buy and sell a security.

2. The percentage by which an asset's market value is reduced for the purpose of calculating capital requirement, margin and collateral levels.
Investopedia Says... 1. The term haircut comes from the fact that market makers can trade at such a thin spread.

2. When they are used as collateral, securities will generally be devalued since a cushion is required by the lending parties in case the market value falls.

Terms Related Links

Collateral
Margin
Market Maker
Market Value
Risk-Based Capital Requirement
Risk-Based Haircut

Terms Related Links
Electronic Trading Tutorial - Learn about the systems that run the market. Topics include market makers, specialists, SuperDOT, ECNs, SOES, Level I, II, and III Access, and more.

Conglomerates: Cash Cows Or Corporate Chaos? - Find out why huge companies don't always deliver big returns for investors.

What is the haircut rate imposed by clearing corporations?

add investopedia foot
www.investopedia.com