Credit enhancement

Definition:

The purchase of the financial guarantee of a large insurance company to raise funds. In the context of project financing, the issuance of a guarantee or additional collateral to reinforce the credit strength of a project financing. Also, the reduction of counterparty risk on a swap transaction through such measures as bilateral netting.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Laffer curve

A curve conjecturing that economic output will increase if marginal tax rates are cut. Named after economist Arthur Laffer.

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