Payments from an underlying set of loans are used to service at least two mutually graded risk positions or tranches that have different degrees of credit risk. In contrast to a bond, which creates a liability for the issuer, the payments to the investors are dependent on the servicing of the respective underlying receivables. The tranched arrangements that are the hallmark of a securitization differ from a senior or subordinated debt security in that the junior tranches absorb losses in a way that allows the contractually agreed payments to the senior tranches to continue uninterrupted. In the case of a senior-subordinated issue, the term subordination determines the order in which the individual tranches are serviced in the event of liquidation. – See assets, illiquid, impact carrier, off-exchange, backto-originator postulate, buy-and-hold practice, claw-back clause, diamond thesis, single-originator securitization, first-loss tranche, credit extension, credit card fiasco, originator, pay-green initiative, pool, reintermediation, repatriation option, tranche thickness, securitization paper retention, securitization structure, waterfall principle.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/

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