The difference between the exhaustion percentage (detachment point) and the attachment percentage (attachment point). It represents the percentage of capital structure of a securitized structure (e.g., a CDO) that a given tranche accounts for. For example, tranche widths may be defined, for a specific CDO, as follows: 10% for equity tranche, 20% for mezzanine tranche, and 70% for senior tranche.
Tranche width is used at the time a CDO trust determines and assigns the number of tranches in the structure, and for the purpose of managing the expected credit ratings for each tranche in the structure.
A wide tranche (thick tranche) spans a wide region of the loss distribution, while a thin tranche only spans a small region of it. A thin tranche is perceived to be riskier than standard tranches since in the case of default, a thin tranche can be completely wiped out very quickly.
