A securities lending transaction is collateralized with cash in the amount of securities' market value plus a margin or haircut. Haircuts necessarily depend on the securities and the security borrowers. This article extends a repo haircut model to securities lending that captures asset...

We cast the ongoing debate on FVA onto a segregated derivative economy, where counterparties are defaultable and unable to post collateral fully. The economy exhibits funding asymmetry in that deposit and borrowing have differing rates. A close examination of the micro financing structure of...

When used as derivatives collateral, securities have to be exchanged for cash in the repo market. The repo market applies different haircuts from collateral agreements, creating a pocket of unsecured credit exposure and uncovered funding. Moreover, repo tenors are typically in months, so the...

Haircut, a discount on the market value of financial collateral, draws its intuition from earlier stock loan brokers' desire to withstand stock market meltdowns without losses. Nowadays it is commonly computed as the 99% tail loss during a 10 day period over a sufficiently long observation. Such...