Level 3 Asset
Private Credit glossary · Loan Structures & Instruments
Definition
Asset valued using unobservable inputs under ASC 820.
Level 3 Asset in plain English
A Level 3 asset is something you own whose price nobody can simply look up, so its value has to be estimated using your own educated guesses and models. Most things have easy prices — a share of Apple has a number on the screen (that's 'observable') — but some assets, like a loan to a private company or a stake in a startup, rarely or never trade, so there's no market price to grab. 'Unobservable inputs' just means the value depends on assumptions you make up (like expected future cash flows or a reasonable discount rate) rather than a real quoted price. 'ASC 820' is simply the accounting rulebook that sorts assets into Levels 1, 2, and 3 by how solid their pricing evidence is — Level 3 being the fuzziest, most judgment-heavy tier.
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