medium · Asset-Backed Securities collateral

What does dilution typically refer to in this context?

1. The issuance of new subordinate bonds that dilute the senior tranche's claim priority.
2. A decrease in the interest rate charged by the seller to its underlying corporate customers.
3. The addition of far too many newly originated receivables into the revolving collateral pool base.
4. Non-cash reductions in the receivable balance, such as product returns or volume discounts.

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