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The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
One form of this is traction alopecia, which is caused by hairstyles that pull the hair tight, such as cornrows, weaves and tight ponytails or buns.
Gwendolyn Hendrix, a former professor, said that she doesn't think ( Middleton always has terrible makeup and hairstyle. Rather, the Duchess of Cambridge steps out in public looking different because she has different stylists who have different specializations and styles.
A lot of entertainers have stuck with this hairstyle, from the up and coming to the already established.
Sakina said the man ordered his wife to go back to the salon and make another hairstyle which she refused.
One unusual category is Best Hairstyle in a Movie, where both Sharon Horgan and Rachel McAdams have nominations for the comedy-mystery Game Night.
She does different trending hairstyle for students and also wears the hairstyles herself too.
Regulations on students' hairstyles and clothing are considered a legacy of the 1910-45 Japanese colonialization of the Korean Peninsula, during which students had to cut their hair in a uniform manner in a show of obedience.
While Lady Gaga or Katy Perry might attract attention for their ever-changing and spectacular hairstyles, others favor continuity.
The 30-year-old sent the youngsters back to school on Wednesday with no changes to their hairstyles but after they were put in isolation again she made the decision to take them out of school.
Lindsay Jones, 34, said she is "livid" that her son was hurt by the comment - and claims he's been singled out while other children have "more extreme" hairstyles.
We've seen some outrageous hair transformations last year, and the catwalks have flaunted some pretty bold hairstyles too.
Barry Smith has outlawed seven types of hairstyles for boys at the school, with the Meet me at McDonald's top of his list.