Tranches

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DEFINITION of 'Tranches'

A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice".

BREAKING DOWN 'Tranches'

Tranche is a term often used to describe a specific class of bonds within an offering wherein each tranche offers varying degrees of risk to the investor. For example, a CMO offering a partitioned MBS portfolio might have mortgages (tranches) that have one-year, two- year, five-year and 20-year maturities. It can also refer to segments that are offered domestically and internationally.

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RELATED FAQS
  1. Are all mortgage backed securities (MBS) also collateralized debt obligations (CDO)?

    Mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) are different concepts with frequent overlap ... Read Full Answer >>
  2. What is a tranche?

    "Tranche" is actually a French word meaning "slice" or "portion". In the world of investing, it is used to describe a security ... Read Full Answer >>
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