Base rate
Asset-Backed Securities glossary · Collateral & Cash Flow Modeling
Definition
In credit card ABS, the sum of bond coupons and servicing fees expressed as an annual rate on principal; a key input to excess spread.
Base rate in plain English
In credit-card-backed bonds, the 'base rate' is basically the yearly cost of running the deal — the interest owed to bondholders plus the fee paid to whoever services the accounts — written as a percentage of the loan balance. It matters because you compare it to what the credit-card borrowers are actually paying in interest; whatever's left over is the cushion ('excess spread') that protects investors. Think of it as the rent plus utilities on a shop: you need your sales to beat that number, and the gap is your safety margin.
Learn these first
Practice Base rate
Related Asset-Backed Securities terms
Asset-Backed Securities practice questions · Asset-Backed Securities flashcards · Asset-Backed Securities study guide