- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 45. Introduction to Asset-Backed Securities
- Subject 5. Collateralized Mortgage Obligations
CFA Practice Question
Bond issuers use different types of credit enhancement to reduce the credit risk of a bond issue and decrease its yield. Which one is NOT categorized as an internal credit enhancement?
A. Excess spread
B. Overcollateralization
C. A letter of credit
Explanation: A letter of credit is a form of external credit enhancement for a bond issue.
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