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Credit Derivative Bond
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A proposed pass-through product based on pools of low-rated bonds held by AAA or AA-rated financial institutions. Prospective highly-rated issuers sought AAA or AA ratings in spite of the fact that the issuer would have served only as a conduit: the cash flows of the lower-rated bonds would pass to the buyers of the credit derivative bonds without any credit enhancement. Credit rating agencies decided that the rating of the underlying bond pool was the appropriate rating and the product was stillborn. See also Credit Derivative.
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Glossary *
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