What is Haircut? How It Work? What is its effects?
- Thread starter Pranav Singh
- Start date
- Tags haircut sharekhan
You can get your terminology cleared below :
http://www.investopedia.com/terms/h/haircut.asp
Generally it is defined as to the % of discount on the market value of securities when used as collateral for a loan. So if the market value of your shares is 10 lacs and is given to the bank as a guarantee to obtain the loan, the bank would depending upon the stocks, consider 20% and more as a 'haircut' In essence, 'haircut' is a margin of safety or buffer that the bank will consider while disbursing the loan, and you would get atleast 20% lesser loan the value of your shares.
It does not have any bearing on your portfolio or profit. Trust this helps.
http://www.investopedia.com/terms/h/haircut.asp
Generally it is defined as to the % of discount on the market value of securities when used as collateral for a loan. So if the market value of your shares is 10 lacs and is given to the bank as a guarantee to obtain the loan, the bank would depending upon the stocks, consider 20% and more as a 'haircut' In essence, 'haircut' is a margin of safety or buffer that the bank will consider while disbursing the loan, and you would get atleast 20% lesser loan the value of your shares.
It does not have any bearing on your portfolio or profit. Trust this helps.
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