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. Derivative

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

    A short-term investment vehicle with a maturity that is typically ...
  5. Asset-Based Finance

    A specialized method of providing structured working capital ...
  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. Professionals

    Are Alternative Mutual Funds, ETFs Right for You?

    Alternative mutual fund and ETFs are gaining popularity but are they a good idea for your regular Joe investor?
  8. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  9. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  10. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center