📎Tranching

Every borrowing pool/deal on qiro marketplace will be split into three tranches representing different risk and reward profiles. the industry standard is three tranche setup(senior, mezzanine, junior) representing low, high, medium risk/reward respectively. 1. Senior Tranche : It's the lowest risk profiles whenever a repayment is made senior tranche receives it first and it has the lowest & fixed interest rate option. if the loan defaults, it will take losses at last offering maximum protection. Liquidity pool investors will be generally investing in this tranche. 2. Junior Tranche : It's the highest risk profile it will receive the repayments at last after senior and mezzanine are paid. if loan defaults, it will take the first hit/loss. the interest rate for this tranche is variable and depends on the success of the loan. underwriters will be investing in this tranche. 3. Mezzanine Tranche : It's medium risk profile it will have medium risk and rewards. whenever a repayment is made it will receive the payment after senior tranche and before junior tranche.

Minimum Tranche ratio : The underwriters based on the assessment of default and loss likelihood will propose a tranche structure to make sure senior is always protected in case of default and junior absorbs maximum loss due to default. Detailed info with example : Interest Rates Calculation

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