How this number is made
A haircut is the slice of market value a lender will not advance. Ten percent on a million leaves nine hundred thousand of borrowing power. The haircut widens when the asset gets riskier. This page does not know the schedule. It applies the percent you type.
- Market value is today’s value of what you pledge.
- The haircut is the lender’s percent, not your loan-to-value. A 10% haircut is a 90% advance.
Formula
Advance = market value × (1 − haircut).
Worked example
With the figures already in the form, amount you can borrow is $900,000.
Questions
Is this the same as a margin requirement?
Same idea, different desk. A maintenance margin is an equity floor. A haircut is the part of value that does not count as collateral.
What if the price falls after I borrow?
The advance falls with it, and the lender may ask for cash. This page uses the value you type now.