Gilt Trip: Did UK government bonds almost blow up the financial system?
Many Happy Returns
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Is the Haircut Getting Bigger?
Haircut is the gap between mark to market value of an asset and how much you're actually going to loan me against it. For a very volatile or risky asset, it's going to have a bigger haircut. The Bank of England has a list of haircuts for a whole bunch of assets. If we dial up the risk of the collateral to say high yield debt, so these are companies which may well default there,. even if it's just one year or less in maturity, it's now 32%.
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