📎Tranching

Every lending pool on Qiro Marketplace can 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