The lower tranche boundary that specifies, in addition to the upper tranche boundary (detachment point), a collateralized debt obligation tranche (CDO tranche) or any similar structure (a CLO tranche). Specifically, a CDO tranche is specified by its attachment and detachment points as percentages of the total pool of collateral. The CDO tranche loss arises when the cumulative collateral loss exceeds the tranche’s attachment point. The attachment point is the minimum of pool-level losses at which a given tranche becomes liable for losses.

In other words, the attachment point is the level of subordination above which a given tranche stands. For the holder of a tranche, the attachment point shows the percentage of the structure that will absorb losses before the tranche in question starts to be affected.

For example if the tranche structure consists of 5% equity, 8% mezzanine and 87% senior debt: the equity subordinates all other tranches (but has no subordination), the mezzanine debt has 5% subordination (i.e., it is subordinated by equity) and attaches at a 5% loss level. The senior debt has 13% subordination (i.e., it is subordinated by both equity and mezzanine) and attaches at a 13% loss level.

The attachment point is also referred to as a size of first loss.