What is tranche meaning?

A tranche refers to a portion of a larger financial transaction that is divided or segmented into smaller parts. In the financial industry, tranches are commonly used for structured finance products such as collateralized debt obligations (CDOs) and mortgage-backed securities (MBS), where a pool of assets is divided into multiple parts with different risk profiles and yields to meet the needs of various investors. Each tranche is typically rated differently based on its level of risk and potential returns. Investors can then choose to invest in the tranche that best fits their investment goals. Tranches have also been used in corporate finance, where a company can raise capital by issuing different classes of bonds or stocks with varying rates of return and levels of risk.