Securitization: Credit Enhancement

Securitization: Credit Enhancement

Intuition Publishing Pty Ltd
Updated Sep 25, 2020

Credit enhancement is used in securitization to provide greater protection to investors against losses due to defaults on the collateral pool. Although most credit enhancement is internal (built into the securitization structure itself), external credit enhancement from third parties may also be used. Here we examine both types of credit enhancement and look at the main techniques involved.