noun General Slang

Repo haircut

· noun · finance

The discount taken off collateral value in a repo trade.

0

Definitions

1

When you borrow cash in a repo and post bonds as collateral, the lender doesn't give you a hundred cents on the dollar — they shave a few percent off to protect themselves if the bonds drop or you default. Treasuries get a tiny haircut, junk gets a fat one. Haircuts widened violently in 2008 and that, more than anything, killed Bear and Lehman.

“Once dealers pushed the haircut on Lehman's collateral to 20 percent, the funding death-spiral was on.”
by community
0

Repo haircut In A Sentence

Once dealers pushed the haircut on Lehman's collateral to 20 percent, the funding death-spiral was on.

Origin & Usage

Money-market jargon; the 2008 crisis literature (Gorton, Bernanke) made the term mainstream.

Variants haircut
Tags #finance#wall-street#repo#funding

People Also Ask

What is a repo haircut?

It's the discount taken off the value of collateral in a repo (repurchase agreement) trade.

How do you use repo haircut in a sentence?

"The lender applied a 5% repo haircut, so the borrower had to post more collateral than the cash they got."

Why is a repo haircut used?

The haircut protects the lender against a drop in the collateral's market value during the term of the trade.

Comments 0