Before revision:  This article develops a  haircut model by treating repos as debt investments and seeks haircuts to control counterparty contingent exposure to asset price gap risk.
After revision: A repurchase agreement lets investors borrow cash to buy securities. Financier only lends to securities' market value after a haircut and charges interest. Repo pricing is characterized with its puzzling dual pricing measures: repo haircut and repo spread. This article develops a haircut model by treating repos as debt investments and seeks haircuts to control counterparty contingent exposure to asset price gap risk.