What is a "haircut" in the trading world?
I'm no crypto or regular trading/investing expert and I get lost/my eyes glaze over as articles use terms I have no idea about. This is one of them. Many times, in the explaination of the term asked about, the explainer uses other words/terms that are also unknown to a novice. Can anyone use laymans terms to explain this.
A haircut is the difference between prices at which a market maker can buy and sell a security. The term comes from the fact that market makers can trade at such a thin spread. The term may also refer to the percentage by which an asset's market value is reduced for the purpose of calculating capital requirement, margin, and collateral levels.