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. CAMELS Rating System

    An international bank-rating system where bank supervisory authorities ...
  3. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  4. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Market Risk

    The possibility for an investor to experience losses due to factors ...
Related Articles
  1. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  2. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  3. Evaluating Bond Funds: Keeping It Simple
    Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

  4. Introduction To Inflation-Protected ...
    Options & Futures

    Introduction To Inflation-Protected ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center