Meaning and calculation
In Bank of Russia repo operations, a haircut is used together with the valuation of transferred securities and revaluation procedures.[22](#source-cm-repo) In a simple model, the monetary amount equals the asset value reduced by the specified proportion. The applicable rules, bases and thresholds may differ; they cannot be reconstructed from the general name alone.
Not a financing interest rate
A haircut is not a financing interest rate and does not promise coverage of every loss. If the asset valuation falls, the previous amount of funding may require additional collateral or other action. Futures margin has a different contractual form; the CFTC distinguishes it from a partial payment for a purchase.[25](#source-cm-margin) The similar word “margin” therefore cannot be equated with the same calculation without explanation.
Terms must be checked
The [repo and revaluation guide](/guides/repo-collateral-haircut/) shows which conditions are specified in a numerical example. Check the relevant agreement, valuation basis, thresholds and procedures before interpreting a haircut. The concept does not by itself describe the creditworthiness of the counterparty or the size of a possible loss.