A credit derivative that has a set of tranches as underlying credit. The the holder receives a spread payment in return for covering all losses arising from a basket of names between two pre-defined levels/ boundaries. The cash-flows generated specifically depend on the default times of the reference credits.

An example of tranched credit derivatives is a synthetic CDO (a tranched CDO). Another example is a credit-linked note (CLN) on a tranche of the CDX index, which is designed to provide protection, for the holder, against default losses in that respective tranche.

These derivatives belong to the broader category of synthetic securitization transactions/ synthetic securitization products.