Different tranches in a mortgage-backed security have different default risk exposure.

Name: Different tranches in a mortgage-backed security have different default risk exposure.
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Different tranches in a mortgage-backed security have different levels of credit risk exposure based on the priority of cash flows they receive from the underlying mortgage pool. Generally, the lower tranches are more exposed to default risk, while the higher tranches have greater protection against losses.

Different Tranches in a Mortgage-Backed Security Have Different Default Risk