My intuition is that thinner tranches are more vulnerable to tail risks, because it seems more likely in the latter case that widespread credit losses in the underlying loan pool could wipe out designated cash flows for the entire tranche – so-called nonlinear, or cliff, effects.
4  BIS Review 155/2010  This leads me to my second topic, the case for correcting the systematic disregard of monetary phenomena in the consensus framework. The case for correcting the systematic disregard of monetary phenomena As I have stressed before, in my view, monetary policy should avoid any kind of shorttermism.