Cut point in the Collateral Agreement effortlessly

Aug 6th, 2022
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When you work with diverse document types like Collateral Agreement, you are aware how significant accuracy and focus on detail are. This document type has its own specific format, so it is crucial to save it with the formatting undamaged. For this reason, working with such documents might be a challenge for traditional text editing software: one incorrect action might ruin the format and take additional time to bring it back to normal.

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How to Cut point in the Collateral Agreement

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This week, Ive been looking at the case of Coleman v Mundell, which was handed down at the end of last month. The case was a dispute about an oral contract. The claimant, Mr C sought specific performance of the contract, which is an order compelling a party to comply with their contractual obligations. It is an equitable remedy and so it is only available at the courts discretion. The facts of this case may be summarised as follows. Mr C, the claimant, had a company which was suffering financial difficulties and he wanted to secure a cash injection into his business. He owned shares in a Spanish entity. The defendant Mr M was Mr Cs friend and also a businessman. Mr C and Mr M had a conversation on the 30th of September 2016. Mr C and Mr M each recalled that conversation differently. At trial, Mr C said that Mr M agreed to make an interest-free loan of 250,000 and that the loan would be secured on Mr Cs shares. Mr M recalled that Mr C had said that

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In finance, a haircut is an assumed reduction in the value of a security to account for the risk of its market value falling when the asset must be sold.
In financial markets, a haircut refers to a reduction applied to the value of an asset. It is expressed as a percentage. For example, if an asset – such as holdings of a particular government bond – is worth €1 million but is given a haircut of 20%, it means it is treated as though it has a value of only €0.8 million.
In finance, a haircut is an assumed reduction in the value of a security to account for the risk of its market value falling when the asset must be sold.
It is levied to protect the lender in case of failure to repay by customer. Let's say, you have margin pledged the shares worth Rs. 5 lacs and received Rs. 4.5 lacs after deducting the haircut. And if the share price falls by 20%, then your lender/broker may have incurred a loss.
The haircut is the percentage difference between the asset's market value and the limit you will receive against your collateral (an asset that is kept as security). In other terms, a haircut is the percentage deducted while allowing a limit on your asset.
In financial markets, a haircut refers to a reduction applied to the value of an asset. It is expressed as a percentage. For example, if an asset – such as holdings of a particular government bond – is worth €1 million but is given a haircut of 20%, it means it is treated as though it has a value of only €0.8 million.
A haircut is expressed as the percentage deduction from the market value of collateral (eg 2%), while an initial margin is the initial market value of collateral expressed as a percentage of the purchase price (eg 105%) or as a simple ratio (eg 105:100). Ideally, collateral should be free of credit and liquidity risks.
What is a Haircut in Finance? The term haircut in finance refers to the reduction applied to an asset's value for the purpose of calculating the capital requirement, margin and level of collateral. It is the difference between the amount of a loan and the market value of the asset to be used as collateral for the loan.
When you take out a mortgage, your home becomes the collateral. If you take out a car loan, then the car is the collateral for the loan. The types of collateral that lenders commonly accept include cars—only if they are paid off in full—bank savings deposits, and investment accounts.
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.

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