In 1997 and the first half of 1998, before turmoil hit world capital markets, the equity tranches sold briskly along with all the other tranches.

ECONOMIST: ��Structured finance�� can bring unstructured losses

By separating a portfolio of derivatives into different tranches, banks can create virtually default-proof securities for conservative investors--if somebody else is willing to buy riskier "equity" tranches whose value vaporizes when as few as one or two of the underlying bonds default.

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