Long-Dated Asset

Definition of 'Long-Dated Asset'


A class of income-generating assets where the revenue stream is generated over a long period of time. Residential mortgages and 20-year bonds are examples of long-dated assets.

Investopedia explains 'Long-Dated Asset'


Long-dated assets can often lead to problems for holders, especially if holder's goal is to generate enough income to pay off interest-rate-sensitive liabilities. If interest rates increase, the holder's loan payments also increase; however, the income generated from the long-dated asset remains the same.

For example, banks generally hold-long dated assets such as residential mortgages. Banks also have interest-sensitive liabilities such as demand deposits from savings accounts. Since the income generated by mortgages tends to be steady over the life of the loan, the amount of money the bank receives from mortgages is limited. However, cash outflows from demand deposits are not generally limited and can potentially skyrocket if interest rates rise high enough. The bank could end up in financial distress if it does not have enough revenue to cover the interest payments to depositors.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center