DEFINITION of 'Weighted Average Rating Factor - WARF'

A measure that is used by credit rating companies to determine the credit quality of a portfolio. This measure allows rating companies to look at a portfolio as a single security, and assign it a single rating.WARFs are most often calculated by rating companies for collateralized debt obligations (CDOs).

BREAKING DOWN 'Weighted Average Rating Factor - WARF'

To calculate the WARF on a CDO the rating agencies must first calculate the rating factor for each instrument (or trading asset) underlying the CDO. Once this is done, a weighted average of the factors is taken based on the size of the underlying instruments. When the WARF is combined with the amortization profile of the CDO portfolio you can determine the chance of default on the pool on investments.

RELATED TERMS
  1. Collateralized Debt Obligation ...

    An investment-grade security backed by a pool of bonds, loans ...
  2. Bespoke CDO

    A type of collateralized debt obligation (CDO) that a dealer ...
  3. Synthetic CDO

    A form of collateralized debt obligation (CDO) that invests in ...
  4. Collateralized Debt Obligation ...

    A special purpose vehicle (SPV) with securitization payments ...
  5. Diversity Score

    A measure, created by Moody's Investors Service, to estimate ...
  6. Broad Index Synthetic Trust Offering ...

    Proprietary name used by J.P. Morgan for creating collateralized ...
Related Articles
  1. Investing

    A Primer On Collateralized Debt Obligation (CDOs)

    A collateralized debt obligation, or CDO, is a structured financial product backed by a pool of loans. When a retail or commercial bank approves loans such as mortgages, auto loans or credit ...
  2. Investing

    The Return of CDOs After the 2008 Financial Crisis

    Learn how the market for CDOs is coming back after the 2008 financial crisis, and understand how the market for these products has changed.
  3. Financial Advisor

    Collateralized Debt Obligations: From Boon To Burden

    CDOs were to be Wall Street's boon - instead they went bust. Find out what went wrong.
  4. Personal Finance

    CDOs and the Mortgage Market

    These structured products contribute to keeping borrowing rates low.
  5. Investing

    Understanding Structured Finance

    Structured finance refers to a complex financial transaction involving large financial institutions and companies with unique needs.
  6. Investing

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  7. Investing

    Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.
  8. Financial Advisor

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  9. Investing

    The Debt Ratings Debate

    Lack of competition and potential conflicts of interest have called the value of these ratings into question.
  10. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
RELATED FAQS
  1. What is the difference between a collateralized debt obligation (CDO) and an asset ...

    Discover the relationships between asset-backed securities (ABS), collateralized debt obligations (CDOs) and mortgage-backed ... Read Answer >>
  2. Are all mortgage backed securities (MBS) also collateralized debt obligations (CDO)?

    Learn more about mortgage-backed securities, collateralized debt obligations and synthetic investments. Find out how these ... Read Answer >>
  3. Were collateralized debt obligations (CDO) responsible for the 2008 financial crisis?

    Learn what role collateralized debt obligations, exotic financial instruments that can be difficult to understand, played ... Read Answer >>
  4. Can private investors benefit from collateralized debt obligations (CDO)?

    Learn who participates in the industry of collateralized debt obligations or CDOs. Get a general idea of how money is generated ... Read Answer >>
  5. What's the difference between a collateralized debt obligation (CDO) and a collateralized ...

    Find out how a collateralized mortgage obligation (CMO) is similar to a collateralized debt obligation (CDO), as well as ... Read Answer >>
  6. Are accounts receivable used when calculating a company's debt collateral?

    Learn how accounts receivables are recorded as assets on a balance sheet; they are used when calculating a company's total ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center