The Initial margin on a repo agreement. It is generally expressed as a percentage of the market price of repo collateral. For example, a 1.5 percent haircut would allow an investor to borrow $98.5 per $100 of a bond’s price. The determinants of a haircut size are: (1) credit quality of underlying securities, (2) historical price volatility of collateral securities, and (3) overall market liquidity. The collateral is regularly revaluated (marked to market) so that the borrower will be asked to post additional collateral if the haircut value decreases during the repo’s life.