Illya Gerasymchuk
Entrepreneur / Engineer
in the end, you get your UST bond back
and it makes sense for you to repurchase the bond (collateral) even if the price falls
as long as the price fall is < ≈haircut (2% in our case)
so if you have a UST bond worth $100:
lender applies a haircut (e.g. 2%) - 100*(1-0.02)=$98
lender sets a repurchase price (e.g. $98.013)
so you use your $100 bond to get a $98 loan, for which you must repay with a fee (interest) $98.013