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In finance, a "haircut" is the difference between the market value of an asset used as collateral in a loan and the value ascribed to that asset for the purpose of it serving as collateral. The haircut is expressed in terms of a percentage of the market value of the asset, and the size of the haircut represents the cost of the loan. The size of the haircut can vary over time and across lenders and borrowers based on a variety of factors, including perceived riskiness of the asset, perceived riskiness of the borrower, market volatility, and the risk appetite of the lender.