20. It is actually devastating for all corporate securities, including equities.

21. This is an especially important concept with regard to those credit derivatives whose value is attached to more than one security or company.

22. In the event of default, if the value of the building exceeds the claim of the senior debt holders, the excess is normally used to partially pay off the subordinated claims. For simplicity, our example assumes that the building will not be worth more than the face amount of the senior debt. Hence, the subordinated holders do not “look to” the real estate for payment, as the senior holders do.