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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
 
 Related Terms
 

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