Risk Tranche

Definition ∞ A risk tranche represents a segment of an investment or financial product that carries a specific level of risk and a corresponding expected return. In structured finance, different tranches are designed to cater to varying investor risk appetites. Each tranche offers distinct risk-reward profiles. This segmentation allows for tailored investment strategies.
Context ∞ While more common in traditional finance, the concept of a risk tranche can apply to certain structured digital asset products or decentralized finance protocols that segment exposure to different levels of protocol risk. News might discuss this in the context of regulatory classifications or the design of innovative investment products within the crypto space. This highlights the growing sophistication of digital asset offerings.