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Junk Tranche

Nick Name
Junk
Parent term
Tranche
The junk tranche is the most risky debt tranche of a security.

  • The junk tranche usually pays the highest rate and has the most risk
  • It is first to absorb losses after the equity trance is wiped out
  • Typically rated Double B or below
  • Can be referred to the "Junior Tranche" if there is no equity tranche

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