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Can somebody tell me why, when they’re talking about those fancy financial products, people use the word “tranche” rather than “slice”? No big deal, I’m just curious.

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  3. Fancy financial products deserves jargon commensurate with its fanciness. (Slices are what you get from loaves of bread and deli meats, not fancy financiers.)

  5. This doesn't quite answer the question, but here are the three earliest instances of the word from the OED:

    c1500 Melusine xi. 43 The said fontayne, where as grett tranchis [p. 50 trenchis] or keruyng was made within the harde roche. 1893 P. FITZGERALD in Month July 337 Huge baskets..in which were huge tranches of bread.

    1930 Economist 10 May (Suppl.) 10/1 The first business of the bank will be the arrangement of a loan to raise $300 million… The first tranche of the combined loan is expected to be offered about the end of May.

  6. French is pretty much the only other Western language where the financial and technical terms are not mostly to overwhelmingly English (though often pronounced a bit differently to suit the local tongues). As such, it is little surprise that there is some linguistic cross pollination.

  7. 'slice' is already used to mean a portion of a large order that is allocated to a particular venue for trading. Which sort of implies that all slices of a particular pie are all composed of the same underlying security.

    Tranche is exactly the opposite – the different tranches are specifically different. They have been called 'levels', but that implies that one is better than the other. And tranche is a euphemism for level.

  8. Possibly because "mezzanine tranche" sounds nicer than "first slice."

    I'm going to take a real stab at it though. My understanding is that post-1790s and into the early 1800s that after paying for wars; the expenses forced on them by foreign commissions during their occupation; some bad investments etc that France was running extremely large debts. Around 1815 – 1820 France started looking around for foreign loans to help them. Because of France's massive debt (it was running above 300 million francs, if I remember correctly, which was obviously massive at the time) and investors were very skeptical (I would be too with such a large debt!) and so rather than bearing the risk all too themselves they diversified the risk by slicing and dicing up the loan – essentially tranching (though quite different than modern tranching, but it was the same principle). My assumption is that the French called them "tranches" because the loans were being sliced up and because the French were engaging in such large amounts of tranching, more than any other borrower in financial history, that the term naturally migrated to other financiers in Amsterdam and London and translated around the world from there. I suspect Salomon Brothers in the 1980s just picked up the old term in the context of collateralized mortgage obligations since the concept of slicing up an underlying security was somewhat similar to old-style tranching.

    That's hardily a rigorous history since I don't know who came up with the idea of tranching nor do I know if the term really was transmitted around the world, but it seems plausible given that investors were very aggressively engaging in a form of tranching with France very early. Furthermore, tranching was not at all common practice (and, in fact, wasn't particularly common until the 20th century) and so such excessive amounts of it (relative to the time) might have given France claim over the terminology. Maybe an economic historian could trace the origins of the term better than I could though.

  11. TheOneEyedMan: if French is "the other language" what is the first "Western language where the financial and technical terms are not mostly to overwhelmingly English"?

  12. I would guess that "slice" carries the allusion of an angle (a slice of pie) while "tranche" represents a layer. In finance, tranches are different layers — they are ranked by quality.

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