- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 18. Asset-Backed Security (ABS) Instrument and Market Features
- Subject 2. ABS Structures to Address Credit Risk
CFA Practice Question
For the purpose of external credit enhancement, an investor would most likely pick a ______ to counter third-party risk.
B. letter of credit issued by a bank
C. bank guarantee
A. cash collateral account
B. letter of credit issued by a bank
C. bank guarantee
Correct Answer: A
Because a CCA is an actual deposit of cash, a downgrade of the CCA provider would not result in a similar downgrade of the security.
User Contributed Comments 1
| User | Comment |
|---|---|
| Inaganti6 | Cash > promise of cash |