Equity Tranche
The equity tranche is the riskiest and potentially highest yielding tranche of a structured security or company's capital structure
Equity Tranche Basics
- The riskiest part of the capital structure
- Absorbs losses first
- Typically does not offer a fixed return - captures all excess gains/cashflow after more senior tranches are paid
- Is the most risky tranche, but also has the highest potential rewards