Business, Legal & Accounting Glossary
The initial margin in a repo transaction, namely the difference between the market value and the value ascribed to collateral used in the transaction, generally expressed as a percentage of the market price. It is also used to describe realised investor losses in a debt restructuring.
legal In a bankruptcy proceeding, the proportional reduction in the debt that will be paid to each creditor, based on an evaluation of the total debt owed and the total assets of the debtor.
The percentage by which the market value of a security used as collateral for a loan or as a margin payment is reduced. The size of the haircut reflects the degree of risk a lender places on the securities. A one per cent haircut would allow a lender to lend 99 per cent of the value of the collateral; a 15 per cent haircut would allow it to lend 85 per cent.
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This glossary post was last updated: 26th April, 2020 | 9 Views.