Definition of Level 1 Asset





What is a Level 1 asset? What is the definition of the term Level 1 asset?

A short while ago we defined the term "Level 3 asset".

A "level 3 asset" is an asset that is nearly impossible to determine a value for. For instance, how would you value a private equity stake? Or an ownership position in a commercial building? These are assets where market prices are not readily available, so companies will do their best to "guess" the value of these assets. These assets are not liquid.

-- Dictionary entry - Level 1 Asset --Level 1 assets, on the other hand, are the exact opposite.

Prices are readily available for these assets, and they are also extremely liquid. Also, these assets trade in active markets.

Example of a level 1 asset? A position in a publicly traded stock. US treasuries. ETFs.

For instance - let's say that XYZ, Inc. is a bank, and XYZ, Inc. has a 10,000 share position in MSFT. This is a Level 1 asset - not only is a price readily available (MSFT is a publicly traded stock), but the asset is also very liquid.

So - Level 1 assets are assets in which there is an active market and in which there are readily available quoted prices.





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