> For the complete documentation index, see [llms.txt](https://docs.onre.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.onre.finance/onyc-in-defi/defi-opportunities/risk-tranching-markets.md).
# Risk-Tranching Markets
ONyc Credit Tranching separates ONyc into two tranches with distinct risk and return profiles. The underlying asset remains unchanged, while yield and loss exposure are allocated differently between the Senior and Junior tranches.
### Tranche Structure
{% tabs %}
{% tab title="srONyc (Senior Tranche)" %}
**srONyc is the Senior Tranche, providing more protected exposure to ONyc. It is best suited for users seeking principal protection and a more predictable return profile.**
* By receiving first-loss protection from jrONyc, srONyc exchanges a portion of ONyc's underlying yield for protection against losses up to the market's coverage ratio.
* As a result, srONyc earns a lower expected yield than ONyc and the Junior tranche, with reduced downside risk.
* The yield earned by srONyc varies based on market utilization and the balance between Senior and Junior capital, while remaining dependent on the performance of the underlying ONyc asset.
* Hold srONyc if you:
* Want to earn ONyc yield with first-loss protection provided by jrONyc
* Are willing to exchange a portion of yield for downside protection
* Prioritize principal protection and lower NAV volatility
* Prefer more protected exposure to ONyc
{% endtab %}
{% tab title="jrONyc (Junior Tranche)" %}
**jrONyc is the Junior Tranche, providing first-loss protection to srONyc. It is best suited for users seeking enhanced yield and willing to assume additional risk.**
* By absorbing losses before the Senior tranche, jrONyc earns ONyc's underlying yield together with the protection premiums paid by srONyc holders.
* As a result, jrONyc is expected to earn a higher yield than the Senior tranche in exchange for assuming first-loss risk.
* The protection premium adjusts based on market utilization and the balance between Senior and Junior capital, meaning expected returns may increase as demand for Senior protection rises.
* Hold jrONyc if you:
* Want to earn ONyc yield plus protection premiums paid by srONyc holders
* Are willing to provide first-loss protection in exchange for higher expected returns
* Accept additional NAV volatility and first-loss risk
* Participate in yield looping or other yield-maximizing strategies
{% endtab %}
{% endtabs %}
### Mechanics
**Protection Coverage:** The amount of protection available to srONyc depends on the market's coverage ratio, which reflects the amount of Junior capital available to absorb losses before the Senior tranche is affected.
**Yield Distribution:** The amount of protection available to srONyc depends on the market's coverage ratio, which reflects the amount of Junior capital available to absorb losses before the Senior tranche is affected.
**Risk Allocation:** If ONyc experiences a decline in NAV, losses are allocated according to the tranche structure: jrONyc absorbs losses first, srONyc remains protected while sufficient Junior coverage exists, and if Junior protection is exhausted, remaining losses may be allocated to srONyc.
### Supported Markets
{% stepper %}
{% step %}
#### Exponent
[srONyc (Senior Tranche)](https://app.exponent.finance/en/market/protected/HM8iLNE2WEN6J1AuwSSCoM37wgeLQFwYZ4ymYLqAoapN)
[jrONyc (Junior Tranche)](https://app.exponent.finance/en/market/boosted/HM8iLNE2WEN6J1AuwSSCoM37wgeLQFwYZ4ymYLqAoapN)
{% endstep %}
{% endstepper %}
---
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