> ## Documentation Index
> Fetch the complete documentation index at: https://docs.royco.org/llms.txt
> Use this file to discover all available pages before exploring further.

# Junior Tranche (JT)

> The Junior Tranche (JT) earns boosted yield as first-loss capital, absorbing losses before Senior and collecting a risk premium in return.

Junior earns the highest yield of the three tranches, in exchange for the highest risk profile. The JT takes the first losses, and receives a risk premium from the ST in exchange for providing coverage. JT is deployed into the same yield bearing base asset as the ST.

JT yield is calculated as follows:

> Base Asset Yield + Risk Premium

Junior also holds first claim on recoveries during an Observation Period. When junior coverage absorbs a drawdown, the amount absorbed is recorded as junior's claim on future appreciation and is repaid off the top of any subsequent gain, before any yield is split. This helps to restore junior's position at its original proportions. Junior forfeits this claim if the Observation Period elapses without recovery, on a Protected Exit Threshold breach, or if junior capital is exhausted.

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*This document is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to sell any securities or financial instruments. Participation in Royco products involves risk, including the potential loss of all capital deployed. Prospective participants should conduct their own independent due diligence and consult with qualified legal, financial, and tax advisors before making any investment decisions.*