The Discount Rate (also Haircut) in a securitisation context denotes the rate by which notional amounts of the Transferred Receivable might be discounted for the purposes of calculating relevant balances.
In the context of Supply Chain Finance (Also Discount Charge) it is when a buyer purchases a Bill of Exchange or an accounts receivable from a vendor, the rate at which it is paid (discounted relative to its face value) prior to its Maturity Date.
Discounting provides an additional Credit Enhancement mechanism
Issues and Challenges
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