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Credit enhancement

• The backing of paper with collateral, a bank LOC, or some other device to achieve a higher rating for the paper.
The firm that securitizes mortgages guarantees against defaults on the underlying pool. This is called credit enhancement.

• Purchase of the financial guarantee of a large insurance company to raise funds.

 
 

Follow this link for all the terms related to credit.

 
 Embedded terms in definition
 Collateral
Credit
Enhancement
Firm
Paper
Pool
Purchase
Rating
Underlying
 
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