A tier created during the process of dividing up access to the underlying pool of assets (loans) into securities of varying seniority. An investor in the senior tranche is also known as a senior note holder and an investor in a junior (also called subordinated) tranche is known as a junior note holder. Cash flows from the underlying pool of assets are then distributed to the investors sequentially with the lower-risk, lower-interest securities (e.g. senior tranches) receiving payments first, followed by the higher-risk securities (e.g. junior, or subordinate, tranches).

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