Asset Quality Rating

AAA

DEFINITION of 'Asset Quality Rating'

A review or evaluation assessing the credit risk associated with a particular asset. These assets usually require interest payments - such as a loans and investment portfolios. How effective management is in controlling and monitoring credit risk can also have an affect on the what kind of credit rating is given.

INVESTOPEDIA EXPLAINS 'Asset Quality Rating'

Many factors are considered when rating asset quality. For example, consideration must be put into whether or not a portfolio is appropriately diversified, what regulations or rules have been put in to place to limit credit risks and how efficiently operations are being utilized. Typically, a rating of one shows that asset quality is good and there is very little credit risk, while a rating of five can signify that there are major asset quality problems and issues that need to be managed.

RELATED TERMS
  1. Six Sigma

    A quality-control program developed in 1986 by Motorola. Initially, ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  4. CAMELS Rating System

    An international bank-rating system where bank supervisory authorities ...
  5. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  6. Market Risk

    The possibility for an investor to experience losses due to factors ...
Related Articles
  1. 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.
  2. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  3. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  4. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  5. Investing

    I have discovered that a bond I am interested in has a sinking fund. What does this mean?

    First, understand that a sinking fund provision is really just a pool of money set aside by a corporation to help repay a bond issue. Typically, bond agreements (called indentures) require a ...
  6. Credit & Loans

    How is my credit score calculated?

    The credit score, commonly referred to as a FICO score, is a proprietary tool created by the Fair Isaac Corporation. This is not the only way to get a credit score, but the FICO score is the ...
  7. Economics

    Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional businesses.
  8. Professionals

    Understanding Interpersonal Skills

    Interpersonal skills are the social skills people use to interact effectively with other people. A lack of good interpersonal skills may lead to unsuccessful personal relationships, as well as ...
  9. Personal Finance

    Understanding Credit

    Credit has three common meanings in the financial world.
  10. Professionals

    Who Counts as an Entrepreneur?

    An entrepreneur is a person who starts a new business or organization, taking some personal financial risk to do so. He or she may quit a secure job to devote time to starting the new business, ...

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