Credit-Linked Note (CLN)

A funded credit derivative: investor pays cash upfront; issuer pays a coupon; in a credit event, the investor loses principal. Funded structure vs unfunded CDS; CLNs dominate SRT issuance (~85–90%).

Attachment Point

The loss level in the reference portfolio at which the protection seller (investor) begins to bear losses. EU SRT mezzanine: typically ~1–3% attachment point.

Detachment Point

The loss level at which the investor's tranche is fully exhausted. EU SRT mezzanine: typically ~7–9% detachment point; losses above fall to the bank's retained position.

First-Loss Tranche

The most junior tranche; absorbs losses first. Banks typically retain 0.5–1.5% of portfolio as first-loss in EU SRT. Risk retention requirement (5%) often satisfied by this piece.