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  • January 17, 2023
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Tranche Coupon

The coupon (interest) that a tranche carries as compensation for its holder (investor) commensurate to the risk profile of the tranche, among other factors. For riskier tranches in a securitized structure the tranche coupon is higher depending on the amount of risk involved (as defined by the overall riskiness of underlying collateral). The coupon consists of a reference rate (floating rate index) adjusted with a specific spread.

An example of a tranche coupon is a mezzanine tranche‘s coupon which is set at 6-month LIBOR plus 5 percent.


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