Business and Personal Finance Dictionary

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• EQUITY TRANCHE
  
  One name for the lowest quality (highest credit risk) tranche in a CDO structure. Sometimes called junior subordinated notes, preferred stock or income notes. The contractual rules for the cash flow distributions in a CDO structure enable the senior tranches to receive high credit ratings by shifting risk to the equity tranche. See "collateralized debt obligation" and "waterfall".
  
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