In Finance, a Haircut Is a Loss
A haircut is the cutting of hair. Bankers borrowed the word for the amount lopped off the value of an asset or a debt.
A haircut is a cutting and styling of hair. Finance borrowed the word with grim humour: when lenders accept less than they are owed, or when collateral is valued below its market price, the difference is a haircut. During debt crises the word appears on front pages with no hairdresser in sight.
- A cutting of the hair. *I need a haircut.*
- A hairstyle. *That is a good haircut.*
- A reduction in value (finance). *Bondholders took a haircut.*
Word forms
| Form | Word | Example |
|---|---|---|
| Noun | haircut | A short haircut. |
| Plural | haircuts | Two haircuts. |
| Verb phrase | get a haircut | Get a haircut before Monday. |
| Related | hairstyle | A new hairstyle. |
| Related | barber | At the barber's. |
How it is used in a sentence
- He got a haircut for the interview.Get, not do, in most English.
- Creditors accepted a fifty per cent haircut.The financial sense.
- The bank applies a haircut to the collateral.A safety margin on valuation.
Hair vocabulary
- Trim — a small cut to tidy the shape
- Fringe / bangs — hair over the forehead, British and American
- Layers — cut at different lengths for shape
- Buzz cut — very short all over, done with clippers
- Blow-dry — shaping with a dryer rather than scissors
A plain compound of *hair* and *cut*, recorded from the nineteenth century. The financial sense appeared in American banking in the twentieth.
Why is a debt reduction called a haircut?
Because something is trimmed off the top without killing the thing itself. The lender still gets most of the money back.
Haircut or hairstyle?
The haircut is the cutting; the hairstyle is how the hair is worn, which can change daily without scissors.