ENGLISH
REFERENCE

haircut

n. · v.
US //ˈhɛɹˌkət// UK //hˈeəkʌt// hair·cut
  1. 1 hair grooming (n.)
    A2 Elementary

    the act of cutting your hair or the new style you have after it is cut.

    the act of shortening or styling the hair, or the resulting hairstyle itself.

    Example

    I need to get a haircut before the wedding because my hair is getting too long.

    Example

    She was so pleased with her new haircut that she immediately booked another appointment for the following month.
  2. 2 financial loss (n.)
    C1 Advanced Technical Formal Law

    a reduction in the value of an investment or the amount of money a person is paid back.

    a proportional reduction in the value of an asset or a debt repayment, often during bankruptcy or debt restructuring.

    Example

    The investors had to take a twenty percent haircut on their original investment.

    Example

    Under the terms of the restructuring agreement, the creditors were forced to accept a significant haircut to prevent the company from total liquidation.

    Usage

    Often used with the verb 'take'.

    Teacher's tip

    This is a common metaphor in financial news and legal proceedings regarding debt.
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  1. 3 collateral margin (n.)
    C2 Proficiency Technical Academic Science

    the difference between the market value of an asset and the amount of a loan it secures.

    the percentage by which the market value of an asset used as collateral is reduced for the purpose of calculating the capital requirement or loan amount.

    Example

    The bank applied a ten percent haircut to the stocks used as collateral for the loan.

    Example

    Regulators increased the required haircut on sovereign debt to ensure that banks maintained sufficient liquidity during the market volatility.

    Usage

    Used as a technical term in risk management and banking.

    Teacher's tip

    This sense is highly specific to banking and risk assessment professionals.
  2. 4 to reduce value (v.)
    C1 Advanced Technical Formal Law

    to lower the recorded value of an asset or a debt.

    to apply a reduction to the value of an asset or financial claim.

    Example

    The government decided to haircut the bonds to manage the national debt.

    Example

    The central bank may choose to haircut certain assets more aggressively if market conditions continue to deteriorate.

    Usage

    Transitive verb requiring a financial asset as an object.

    Teacher's tip

    The verb form is less common than the noun but appears frequently in high-level financial reporting.
Origin

From hair + cut.

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