One of the most common forms of credit enhancement in CDOs is subordination of junior tranches. In the multi-tranche or senior/subordinated CDO, the subordinated or junior tranches support the senior tranches. The issuance proceeds from debt and equity are used to purchase collateral (assets) generally with a principal balance equal to the rated debt amounts (liabilities) plus the equity share. Since the equity is not typically rated, the asset pool supporting the rated liabilities is greater than the rated liability amounts. Thus, there is a loss amount that the assets can sustain without immediately affecting any of the rated liabilities.