Business, Legal & Accounting Glossary
Any methodology that reduces the credit risk of a transaction with a counterparty.
Credit enhancement encompasses a variety of provisions that may be used to reduce the credit risk of an obligation. Credit enhancements are often incorporated into OTC derivatives, corporate debt, securitized debt and other instruments.
Techniques of credit enhancement include:
Other techniques may sometimes also be referred to as credit enhancement. These include netting agreements, credit downgrade triggers, and bundling with credit derivatives.
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This glossary post was last updated: 17th April, 2020 | 0 Views.