The Big Short

by

Michael Lewis

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Tranche comes from the French word for portion, and in finance, it generally means part of an investment. In The Big Short, the most important tranches are the various different grades of subprime mortgage bonds, which range from AAA (supposedly the safest investments) to B (supposedly the riskiest). In fact, the Big Short traders learned that even higher-rated tranches of bonds were composed of very risky loans and that their supposed safety was a complex illusion created through financial trickery.
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Tranche Term Timeline in The Big Short

The timeline below shows where the term Tranche appears in The Big Short. The colored dots and icons indicate which themes are associated with that appearance.
Chapter 1
Outsiders vs. Conformists  Theme Icon
The Problems with Capitalism  Theme Icon
Pessimism vs. Optimism Theme Icon
Needless Complexity Theme Icon
...firms like Salomon Brothers devised a system to pool home loans together into groups called “tranches.” Buyers of bonds in the first tranche received the highest interest rate in exchange for... (full context)
Chapter 5
Outsiders vs. Conformists  Theme Icon
The Problems with Capitalism  Theme Icon
Pessimism vs. Optimism Theme Icon
Needless Complexity Theme Icon
...different than what Mike Burry and Steve Eisman do. Instead of betting against the worst tranches of bonds (triple-B-minus), they bet against a higher tranche (double-A)—a move that ultimately ends up... (full context)