B

问题如下：

Which of the following statements about credit tranching is incorrect?

选项：

A.

The waterfall structure redistributes the credit risk associated with the underlying collateral.

B.

Some of the bond classes may have a better credit rating than the company that is seeking to raise funds.

C.

Risk ratings are based on the market risk of the pool of securitized loans or receivables as well as the priority of how they absorb losses.

解释：

Risk ratings are based on the credit risk (not market risk) of the pool of securitized loans or receivables as well as the priority of how they absorb losses.

A is incorrect because it is a correct statement. The waterfall structure redistributes the credit risk associated with the collateral. The creation of a set of bond classes allows investors to choose the level of risk that they prefer to bear and receive return accordingly. B is incorrect because it is a correct statement. Each bond class in the transaction receives a risk rating that reflects its credit risk, and some of the bond classes may exhibit a better credit rating than the company that is seeking to raise funds because of collateralization or credit enhancement.