In structured finance, a tranche (misspelled as traunch or traunche) is one of a number of related securities offered as part of the same transaction. The word tranche is French for slice, section, series, or portion. In the financial sense of the word, each bond is a different slice of the deal's risk. Transaction documentation (see indenture) usually defines the tranches as different "classes" of notes, each identified by letter (e.g. the Class A, Class B, Class C securities). The term "tranche" is used in fields of finance other than structured finance (such as in straight lending, where "multi-tranche loans" are commonplace), but the term's use in structured finance may be singled out as particularly important. Use of "tranche" as a verb is limited almost exclusively to this field.
From Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Tranche (accessed: January 23, 2009).
Example:
Bob's most recent investment foray, where he tried to time the bond market by splitting his investment in to sections and then swapping these tranches in and out of various ratings of finance sector bonds, proved disastrous, with one small exception. All his money was gone, but he had a few new entries for his book, "How to lose money like a pro".
- It is never too late to make an unwise investment choice
- If your investment strategy can be explained by anyone who doesn't have a PhD, it is insufficiently complicated
