We study repo haircut determinants and develop the haircut calculation model. Collateral securities are government and corporate fixed-incomes, and we examine the determinants in Indonesia, Malaysia, Thailand, and Hong Kong. Implementing the Generalized AutoRegressive-Conditional Heteroskedasticity (GARCH) process, we find that the changes in long-memory returns, liquidity, and currency influence haircuts. Then, we introduce the haircut model using the historical and parametric Value-at-Risk (VaR), burdening the borrower as much as the α-percentile collateral loss. When borrowers default, lenders get the collaterals and haircuts to compensate for the collateral-price change
Gunadi, Iman; Sasongko, Aryo; and Sari, Dian Fitriarni
"Analyzing Collateral Repo Haircuts In Asian Countries,"
Bulletin of Monetary Economics and Banking: Vol. 25:
4, Article 1.
Available at: https://bulletin.bmeb-bi.org/bmeb/vol25/iss4/1