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Definition: A-Note

A-note belongs to the highest trench of asset back securities. It is the most secure and senior to other notes like B-notes in case of bankruptcy and credit defaults. So A-note is paid back first and has the least probability of defaulting. Generally it is labelled with a rating of AAA or AA or A with respect to the quality and risk of the underlying asset.

Apart from A-notes there are other notes which belong to lower trenches and are known as subordinate notes. This notes has higher chance of default and thus carries higher risk. Though A-note has lower risk and offers more credit protection but still an investor in this tranche needs to monitor credit worthiness of subordinate classes. With the rise of risk level in these classes the chances of default will increase.


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