Cash and Synthetic CDO & CDO² Tranches
A Tranche is 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".

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.

Fair Value Drivers
  • Tranche structure
  • Weighted average rating factor
  • Asset management fees
  • Coverage tests
  • Performance of collateral
  • Risk exposure of synthetic CDOs

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