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 ?
a pioneer in the $41 billion hair care industry (source: 1991 America Salon Green Book -- estimated), operates more than 650 haircutting franchises nationwide, providing nearly 24 million haircuts annually.
The haircutting by the three women occurred Wednesday night.
The HairMax store will stand out as a discount service- oriented store specializing in haircutting and styling -- offering great haircuts at great prices.
The company's holdings include the newly developed HairMax salon concept, utilizing quick service techniques and discount pricing to focus on the lucrative and recession-proof haircutting and coloring trend, as well as BeautyWorks USA and Cleaning Express, a provider of home services with over 6,000 residential customers.
Major hair clipper/ trimmer suppliers are addressing these trends with home haircutting kits designed to be practical, affordable and fun.
As the top contender in men's haircutting, Knockouts is a full-service salon and comprises a specially chosen and expertly trained staff of employees wearing Knockouts Girls(R) boxing uniforms.
The "Official haircutter of the VFW," Sport Clips is the haircutting chain for men and boys, where "Guys win
This men and boys haircutting franchise is experiencing incredible growth nationally because of its marketing and high quality standards.
The 22-piece home haircutting kit features a clipper with an electromagnetic motor as well as adjustable blades.
For more information on home haircutting, check out a new infographic from Wahl titled, Cut Your Hair like a Man.
There are 4 haircutting stations, a manicure/pedicure station and tanning available.
Haircutting has gone the way of pediatric dentistry, children's clothing retailers and indoor fitness centers - to the kids - and the money has followed.