CDO tranche spread

[afterworkguinness]

Hi ,
In Chapter 1 of Meissner, he says regarding the financial crisis "The equity tranche spread increased sharply". Is this the spread between the equity trance and its next superior tranche or the most superior tranche?

Thanks

 

[ShaktiRathore]

Hi
The spread is measured wrt a standard risk free rate as treasury rate but Libor is commonly used as proxy for risk free rate. equity spread=equity interest rate -libor.
Thanks

 

[afterworkguinness]

Thanks @ShaktiRathore . So the return of the equity tranche tanked against the risk free rate?