Haircut Values

Haircut values represent the percentage discount applied to the market value of an asset when it is used as collateral. This is done to account for the potential volatility of the asset and the risk that its value might decrease.

For example, if an asset has a 10 percent haircut, only 90 percent of its market value is counted towards the trader's collateral. Assets that are more volatile or less liquid typically have higher haircut values.

This practice ensures that the collateral remains sufficient even if the asset price drops significantly. It is a crucial risk management tool for exchanges and lending protocols.

It helps maintain the overall integrity of the margin system.