Term: Tranche

Typically used in the structured credit market which includes asset-backed securities. A tranche is a tranche one of a number of related securities offered as part of the same transaction. Typically a structured credit offering will have different tranches for sale with different risk and return characteristics with the safest and lowest-yielding trache at the top and the riskiest and potentially highest-yielding trache at the bottom. The highest rated traches have the highest priority of payments. If there is an equity tranche in an offering it is always the lowest trache with the highest perceived risk. As in: The CLO we were in hit a speed bump and all the tranches below us got wiped out.

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