🔵 THE BASICS OF TRANCHES
▶️ Tranches in structured finance are a fairly recent development, spurred by the increased use of securitization to divide up sometimes-risky financial products with steady cash flows to then sell these divisions to other investors. The word tranche comes from the French word for slice.
▶️ The discrete tranches of a larger asset pool are usually defined in transaction documentation and assigned different classes of notes, each with a different bond credit rating.
▶️ Senior tranches typically contain assets with higher credit ratings than junior tranches. The senior tranches have first lien on the assets—they're in line to be repaid first, in case of default. Junior tranches have a second lien or no lien at all.
▶️ Examples of financial products that can be divided into tranches include bonds, loans, insurance policies, mortgages and other debts.
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💰 @Exchange 🪙
▶️ Tranches in structured finance are a fairly recent development, spurred by the increased use of securitization to divide up sometimes-risky financial products with steady cash flows to then sell these divisions to other investors. The word tranche comes from the French word for slice.
▶️ The discrete tranches of a larger asset pool are usually defined in transaction documentation and assigned different classes of notes, each with a different bond credit rating.
▶️ Senior tranches typically contain assets with higher credit ratings than junior tranches. The senior tranches have first lien on the assets—they're in line to be repaid first, in case of default. Junior tranches have a second lien or no lien at all.
▶️ Examples of financial products that can be divided into tranches include bonds, loans, insurance policies, mortgages and other debts.
━━━━━━━━━━━
💰 @Exchange 🪙