What does a tranche mean in finance?

In finance, a tranche refers to a portion, piece, or slice of a pool of securities, often used in the context of structured finance. Tranches are typically created when a financial product, such as a mortgage-backed security or collateralized debt obligation, is divided into different segments that can be sold to investors. Each tranche may have varying levels of risk, return, and maturity, allowing investors to choose based on their risk tolerance and investment strategy. To summarize, a tranche in finance is a segment of a larger financial product, often associated with structured finance, that allows for varying levels of risk and return. This concept is crucial for understanding how securities are structured and sold to investors.