What is add-on haircut in SAP FS-LMS - Liquidity Management Suite?

SAP Term: add-on haircut

• Component: FS-LMS

• Component Name: Liquidity Management Suite

• Description: An additional haircut applies on top of the initial haircut. For example, if a security is less liquid or more volatile, an additional add-on haircut may be applied.

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• Key Concepts: 
  Add-on haircut is a feature of the FS-LMS Liquidity Management Suite (LMS) that allows users to set a haircut percentage for each add-on transaction. This percentage is used to calculate the amount of funds that must be held in reserve for each add-on transaction. The haircut percentage is applied to the total amount of the add-on transaction and the resulting amount is held in reserve. 
  
  How to use it: 
  To use the add-on haircut feature, users must first set a haircut percentage for each add-on transaction. This can be done by navigating to the “Settings” tab in the LMS and selecting “Add-on Haircut” from the dropdown menu. Once the haircut percentage has been set, it will be applied to all future add-on transactions. 
  
  Tips & Tricks: 
  It is important to note that the add-on haircut feature only applies to add-on transactions and not to regular transactions. Additionally, it is important to remember that the haircut percentage must be set before any add-on transactions are made in order for it to take effect. 
  
  Related Information: 
  For more information on the FS-LMS Liquidity Management Suite, please visit SAP’s website at https://www.sap.com/products/fs-lms.html. Additionally, you can find more information on liquidity management best practices at https://www.sap.com/documents/2018/09/f9f3d7a2-e8b3-0010-82c7-eda71af511fa.html.