A-Note

DEFINITION of 'A-Note'

The highest tranche of an asset backed security or other structured financial product. An A-note is senior to other notes, such as B-notes in bankruptcy or other credit proceedings, and is paid back first with funds from the underlying assets. They can be labeled AAA, AA, or A, depending on the credit quality of the underlying asset. Can also be referred to as a class a note.

BREAKING DOWN 'A-Note'

Lower tranches of notes are referred to as subordinate notes. While an A-note does offer more credit protection than other notes, investors in this tranche must still pay attention to the credit worthiness of investments in the subordinate classes. If the risk levels of those investments increase, the chances of default and repayment risk rise.

RELATED TERMS
  1. Sequential Pay CMO

    A type of collateralized mortgage obligation (CMO) in which there ...
  2. Active Tranche

    A tranche of a collateralized mortgage obligation (CMO) that ...
  3. Collateralized Loan Obligation ...

    A security backed by a pool of debt, often low-rated corporate ...
  4. Credit Tranche

    A system used by the International Monetary Fund (IMF) to govern ...
  5. Companion Tranche

    A class of tranche found in planned amortization class (PAC) ...
  6. Accrual Bond

    A bond that does not pay periodic interest payments. Instead, ...
Related Articles
  1. Personal Finance

    Why Are Mortgage Rates Increasing?

    Learn how the secondary mortgage market and investor demand affect the cost of home ownership.
  2. Investing

    What Are Tranches?

    “Tranche” is a French word that refers to a slice.
  3. Investing News

    What Is the Value of a AAA Credit Rating? (XOM)

    Following the Exxon credit rating downgrade, investor's are asking is there any value in even having a AAA credit rating?
  4. Bonds & Fixed Income

    3 Bonds You May Have Never Heard Of

    These lesser-known bonds may give your portfolio a boost when other investments products fall short.
  5. Stock Analysis

    What Do AA+ And AAA Credit Ratings Mean?

    Whether you held a AAA or AA+ rating, the difference didn't seem to matter to Mr. Market on Monday.
  6. Markets

    The Return of CDOs After the 2008 Financial Crisis

    Learn how the market for CDOs is coming back after the 2008 financial crisis, and understand how the market for these products has changed.
  7. Home & Auto

    Exploring Real Estate Investments: Buying And Owning Real Estate

    By Ian Woychuk, CFA In Chapter 2, we presented the investment selection matrix, which outlines your alternatives when choosing the kind of real estate investment to make. You can choose to invest ...
  8. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  9. Credit & Loans

    Bankruptcy Consequences

    You've done the deed and are out from under your debts – or embarked on a repayment plan. What consequences can you expect and how long will recovery take?
  10. Investing Basics

    CMO vs CDO: Same Outside, Different Inside

    The concept of collateralizing and structured financing predates the market for collateralized mortgage obligations and collateralized debt obligations.
RELATED FAQS
  1. Who bears the risk of bad debts in securitization?

    Bad debts arise when borrowers default on their loans. This is one of the primary risks associated with securitized assets, ... Read Answer >>
  2. Why do banks securitize some debts, and how do they sell them to investors?

    Learn how and why banks securitize debt, how the securitized debt is sold to other investors, and how different the different ... Read Answer >>
  3. What is the difference between subordinated debt and senior debt?

    Understand the difference between subordinated debt and senior debt. Learn what a company is required to do in case of bankruptcy. Read Answer >>
  4. How will bankruptcy affect my ability to get credit in the future?

    Learn how filing bankruptcy affects your ability to obtain credit in the future, and find out how long a bankruptcy stays ... Read Answer >>
  5. Is credit counseling as damaging as bankruptcy on my credit report?

    Learn whether credit counseling is as damaging as bankruptcy. Bankruptcy wipes out all debts, but it can cut you off from ... Read Answer >>
  6. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center