What is an 'Asset Base'

An asset base refers to the 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.

BREAKING DOWN '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. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses ...
  2. Underlying Asset

    A term used in derivatives trading, such as with options. A derivative ...
  3. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  4. Troubled Asset

    Assets for which banks have overpaid such as loans that are made ...
  5. Asset Financing

    Using balance sheet assets (such as accounts receivable, short-term ...
  6. Appreciation

    An increase in the value of an asset over time. The increase ...
Related Articles
  1. Investing

    What is a Real Asset?

    A real asset is a physical asset that has value.
  2. Personal Finance

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  3. Investing

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  4. Personal Finance

    What Does a Lender Do?

    A lender provides funds to another with the expectation those funds will be repaid with interest.
  5. Investing

    Financing Basics For First-time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  6. Trading

    Derivatives 101

    A derivative investment is one in which the investor does not own the underlying asset, but instead bets on the asset’s price movement with another party.
  7. Personal Finance

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  8. Investing

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  9. Investing

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  10. Managing Wealth

    Explaining Financial Assets

    A financial asset is intangible property that represents a claim on ownership of an entity or contractual rights to future payments.
RELATED FAQS
  1. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  2. What is the difference between carrying value and market value?

    Understand the difference between carrying value and market value. Learn when a company uses carrying value to value an asset ... Read Answer >>
  3. What is the difference between current assets and fixed assets?

    Learn what current assets and fixed assets are, examples of current and non-current assets, and the differences between these ... Read Answer >>
  4. How do you account for changes in the market value of various fixed assets?

    Understand how to account for changes in the fair market value of a company's fixed assets. Learn what accounting methods ... Read Answer >>
  5. What happens to accumulated depreciation when you sell an asset?

    Learn what happens to a company's accumulated depreciation when it sells an asset. Understand why accumulated depreciation ... Read Answer >>
Hot Definitions
  1. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  2. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  5. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  6. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
Trading Center