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Rating agencies ascertain the credit enhancement level for a reference portfolio based on the analysis of credit quality, expected loss and pool diversity required for senior and mezzanine classes to achieve the desired rating on the CLO structure of issued debt securities. In this case, the value of insurance is assumed to be the difference between the premium and the expected loss or is related to the probability that losses will exceed the premium. The affirmations, affecting approximately $126 million of the outstanding certificates, are taken as a result of a stable relationship between credit enhancement (CE) and expected loss. |
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