Haircut

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Haircut

The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction.

Haircut

1. The reduction of value to securities used as collateral in a margin loan. That is, when one places securities as collateral, the brokerage making the loan treats them as being worth less than they actually are, so as to give itself a cushion in case its market price decreases.

2. The bid-ask spread at which a market maker buys and sells securities. It is called a haircut because it is a thin spread.

haircut

A deduction in the market value of securities being held by brokerage and investment banking firms as part of net worth for calculating their net capital. The size of a haircut varies with the particular type of security held.

Haircut.

A haircut, in the financial industry, is a percentage discount that's applied informally to the market value of a stock or the face value of a bond in an attempt to account for the risk of loss that the investment poses.

So, for example, a stock with a market value of $30 may get a haircut of 20%, to $24, when an analyst or money manager tries to anticipate what is likely to happen to the price.

Similarly, when a broker-dealer calculates its net capital to meet the 15:1 ratio of debt to liquid capital permissible under Securities and Exchange Commission (SEC) rules, it typically gives volatile securities in its portfolio a haircut to reduce the potential for being in violation.

The only securities that consistently escape a haircut are US government bonds because they are considered free of default risk.

References in periodicals archive ?
Sadiq Ali, 33, takes not more than 20 minutes for each haircut and charges just $2 (Dh8 approx) for 'the spicy haircut', a name he has given for the cut.
Kaizen offers a snappy solution with a reasonably priced haircut that won't take too much of your precious time,' Gabas says.
That's where the government has stepped in to make it easier for banks to take a haircut in stressed loans or one-time settlement in defaulted cases.
Owned by Westchester, NY resident Mark Young, the salon and barber shop specializes in haircuts, but offers other services such as straight razor shaves and neck shaves.
For four hours, Holmes gave free haircuts to students preparing to return to school as part of the Back to School Bash in Comiskey Park.
Namely that ECB chief Mario Draghi on April 4, 2013 called the haircut "illegal" and therefore the haircut could not be voted upon by the Cypriot Parliament.
Continue reading "Lag B'Omer Haircuts That Help Those in Need" at.
IF YOU WALK INTO A SALON and request the same haircut that would be given to a man, you should be charged the same.
A salon which poked fun at the North Korean dictator's haircut claimed it received an angry visit from officials of the communist state.
We don't condone extreme haircuts at the school and so will not have a child in the usual classes.