Skip to main content
Trading Terms

Haircut

This is a crucial concept to understand when dealing with securities, such as stocks, bonds, and derivatives. A higher haircut means a larger difference between the market value and loan amount, making it riskier for the lender. It is a way for lenders to protect themselves from potential losses and is often determined by the creditworthiness of the borrower.

Welcome to today's lesson on finance terminology. Today, we will be discussing the concept of a Haircut in the financial world. This term refers to the difference between an asset's market value and the loan amount. It is an important concept to grasp when dealing with securities like stocks, bonds, and derivatives. A higher haircut indicates a greater risk for the lender as there is a larger difference between the market value and loan amount. Lenders use haircuts as a way to safeguard themselves from potential losses, and the amount is typically influenced by the borrower's creditworthiness.

Related terms

Elasticity

Understand the meaning and definition of Elasticity in the context of stock market, trading, and investments.

MORE
Inside Day

Understand the meaning and definition of Inside Day in the context of stock market, trading, and investments.

MORE
Float

Understand the meaning and definition of Float in the context of stock market, trading, and investments.

MORE
Reversal Stop

Understand the meaning and definition of Reversal Stop in the context of stock market, trading, and investments.

MORE
Gap Analysis

Understand the meaning and definition of Gap Analysis in the context of stock market, trading, and investments.

MORE
Coincidence

Understand the meaning and definition of Coincidence in the context of stock market, trading, and investments.

MORE

Open Free Demat Account!

Join our 3.8 Cr+ happy customers

+91
Explore other categories
Enjoy Zero Brokerage on Equity Delivery
10 Cr+DOWNLOADS

Enjoy Zero Brokerage On Stock Investments

Get the link to download the App

Scan this QR code to download the app
Get it on Google PlayDownload on the App Store

Open Free Demat Account!

Join our 3.8 Cr+ happy customers
+91