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Basic Question 6 of 11
Which of the following is a form of external credit enhancement?
II. Bond insurance
III. A corporate guarantee
IV. A letter of credit
I. A bond "wrap"
II. Bond insurance
III. A corporate guarantee
IV. A letter of credit
User Contributed Comments 3
| User | Comment |
|---|---|
| kalps | 'Wrap' refers to insurance |
| DariSH | So, I and II are actually the same |
| Roman91 | DariSH, I and II are not exactly the same. Insurer can default just as much as issuer of debt security; therefore, there is SOMEONE out there who will guarantee that insurer will pay you in the case if issuer defaults. So WRAP essentially refers to an additional layer of protection for debt holder. |
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Learning Outcome Statements
describe typical credit enhancement structures used in securitizations
CFA® 2024 Level I Curriculum, Volume 4, Module 18.