Repo Market & Collateral Haircut Simulator (2D)

Bank's overnight funding need

Cash need $100k

Collateral holdings (bonds) $150k

Borrowing route

Repo: sell the bond overnight, buy it back tomorrow at a slightly higher price. The lender holds the collateral, so the rate is low — but they only advance a haircut-adjusted share of its value.

Market stress / collateral volatility

Stress level 10%

Nothing about the bank's own credit changes here — only the market's confidence in the collateral's resale value. Watch the scale tip and the haircut bite grow, not the borrower.

Live readouts

Unsecured cost /night

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Haircut %

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Cash raisable via repo

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Repo cost /night

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Need fully covered by chosen route?

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How it works

An unsecured overnight loan carries a rate that prices pure counterparty risk — flat, and independent of what the borrower owns. A repo instead sells a bond to the lender overnight against cash, with a same-day agreement to buy it back slightly dearer; because the lender physically holds the collateral, the rate charged is far lower. But the lender never advances the collateral's full market value — it applies a haircut, holding back a safety margin in case that collateral's price falls before the next-day repurchase.

haircut% = base + stress-driven premium
cash raisable = collateral value × (1 − haircut%)
covered = cash raisable ≥ cash need

Balance scale — the left pan holds the cash need, the right pan holds what the chosen route actually delivers; it tips down toward whichever side is heavier.
Coin stack — represents the collateral's market value. As stress rises, a red "haircut bite" eats into the top of the stack — the coins never leave the bank's balance sheet, but the lender simply won't advance cash against that bitten slice.
Haircut curve — plots how the haircut accelerates with stress (it is not a straight line); the dot marks where the current stress slider sits on that curve.

Real-world relevance: this haircut mechanic is what turned "safe, collateralized funding" into a sudden liquidity crunch in episodes like the 2008 repo freeze and September 2019's repo-rate spike — the collateral didn't disappear, lenders just stopped valuing it the same way.