Know Your Exec Terms: What is a Tranche exactly?

English: Risk and Return for Investors

Risk and Return for Investors (Photo credit: Wikipedia)

Tranche really means to “slice” in French.  When referring to mortgage-backed securities which are separated into tranches, these tranches have differing levels of payment precedences and interest rates. Senior tranches for e.g., get paid first but carry the lowest interest rates.

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