Tranches separate a liability into separate segments that are designed to offer various levels of risk and return.

More About Tranche

Tranches separate a liability into separate segments that are designed to offer various levels of risk and return.

  • Another name for Tranches is Portions
  • Each tranche has varying risks, expected returns, maturities and credit ratings
  • Tranches allow investors to pick their level of return and risk
  • Tranches are common in secularizations, collateralized loan oblications
  • There are common names for tranches with specific credit ratings
    • Equity
    • Senior Tranche (rated Tripple A and Double A)
    • Mezzanine Tranche (rated Single A and Tripple B)
    • Junk Tranche (rated Double B or below)