What is CROSS GUARANTEE?

A GUARANTEE provided by one company to another company that is often related, such as a subsidiary or joint venture, and a reciprocal guarantee provided in the opposite direction. Cross guarantees may be highly correlated, meaning the financial performance of one guarantor can improve or deteriorate at the same time as that of the second guarantor; this can magnify any associated CREDIT RISK exposures. Also known as PIG ON PORK. See also FINANCIAL GUARANTEE. CROSS HEDGE See CROSS ASSET HEDGE.

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