In structured finance
the Capital note
is the most junior security issued by a Structured investment vehicle
. It is comparable to the Equity Tranche
of a CDO
. Investors who buy the Capital Notes are the first in line to bear risk if the cash flows from the SIV's assets are insufficient to cover promised payments to all investors.
See Securitization transaction for more details on how the process of slicing up risk (or "tranching") works.