Asset Base

AAA

DEFINITION of 'Asset Base'

The underlying assets giving value to a company, investment or loan. The asset base is not fixed, it will appreciate or depreciate according to market forces. Lenders use physical assets as a guarantee that at least a portion of money lent can be recouped through the sale of the backed asset in the case that the loan itself cannot be repaid.

INVESTOPEDIA EXPLAINS 'Asset Base'

The value of a home might increase or decrease over time, affecting the underlying collateral in a mortgage. Similarly, the price of a commodity used as the asset base of derivative can also increase or decrease rapidly, changing the price that investors are willing to pay for it. Examples of asset bases include a home (for a mortgage) and factory equipment (business loan). A derivative would "derive" its value from an underlying asset.

RELATED TERMS
  1. Asset-Backed Security - ABS

    A financial security backed by a loan, lease or receivables against ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Asset-Based Finance

    A specialized method of providing structured working capital ...
  4. Derivative

    A security whose price is dependent upon or derived from one ...
  5. Asset-Backed Commercial Paper - ...

    A short-term investment vehicle with a maturity that is typically ...
  6. Accident Year Experience

    Premiums earned and losses incurred during a specific period ...
Related Articles
  1. Personal Finance

    Using Economic Capital To Determine Risk

    Discover how banks and financial institutions use economic capital to enhance risk management.
  2. Mutual Funds & ETFs

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
  3. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  4. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  5. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  6. Active Trading Fundamentals

    Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.
  7. Fundamental Analysis

    What is the difference between operating cash flow and net income?

    Learn how net income is an income statement for a certain period of time, while cash flow shows inflows and outflows based on conversion of sales into cash.
  8. Fundamental Analysis

    How do I calculate dividend payout ratio from a balance sheet?

    Understand what the dividend payout ratio indicates and learn how it can be calculated using the figures from a company's balance sheet statement.
  9. Credit & Loans

    When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling or trading.
  10. Fundamental Analysis

    Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to receive them from banks.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center