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Suppose that the repo haircut is x. Then, in order to cover 100 worth of deposits you have to repo 100/(1-x) worth of eligible assets.
In my example x is 5% so I made a mistake of about 0.25%... Economics is politics by other means
From the point of view of the lender, obviously, the haircut is a discount on the value of the collateral.
I want to borrow 100, I need to pledge 105 worth of assets.
I am receiving an asset worth 100 as collateral, I will offer a loan of 95. Economics is politics by other means
In my example x is 5% so I made a mistake of about 0.25%...
Yes, but just moments prior I was talking about 28 % haircuts, and then it's no longer a wholly trivial matter...
- Jake Friends come and go. Enemies accumulate.
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