Definition ∞ Yield segregation is the practice of separating the principal amount of an investment from the returns or yield it generates. This allows for different risk and return profiles to be offered to investors, where some might receive only the principal and others only the yield. It is a common technique in structured finance. This method tailors investment opportunities.
Context ∞ In decentralized finance, yield segregation is a key feature of many structured yield products, enabling various strategies for earning returns on digital assets. Understanding how yield is segregated helps investors assess the specific risks and potential profits associated with different tranches or investment options. Clear disclosure of segregation methods is crucial for market participants.
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