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All main topics / Finance & Investment / Derivatives / Derivatives
36
A haircut of 20% means that
A.A bond with a market value of $100 is considered to be worth $80 when used to satisfy a collateral request
B. A bond with a face value of $100 is considered to be worth $80 when used to satisfy a collateral request
C.A bond with a market value of $100 is considered to be worth $83.3 when used to satisfy a collateral request
D.A bond with a face value of $100 is considered to be worth $83.3 when used to satisfy a collateral request
Answer: A

A haircut is the amount the market price of asset is reduced by for the purposes of determining its value for collateral purposes. A is therefore correct.
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015

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