> For the complete documentation index, see [llms.txt](https://docs.huma.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.huma.finance/products/huma-institutional/tranches/pnl.md).

# P\&L Policies

## Yield Distribution Policies

We support two yield distribution policies: fixed yield and risk-adjusted yield.

* In fixed yield mode, the senior tranche yield remains constant as long as risk loss doesn't prevent this.
* In risk-adjusted yield mode, the yield is first determined by the senior-junior asset ratio, and then a portion of the return is transferred from the senior to the junior tranche. For instance, a 20% adjustment means shifting 20% of the return from the senior to the junior tranche.

## Protection From Losses

To guarantee adequate protection for the senior tranche, a maximum leverage ratio is set between the senior and junior tranches for each pool. A 4:1 ratio means that a minimum of 20% of the pool should be junior tranches and a maximum of 80% can be senior tranches. As long as no more than 20% of the pool defaults, the principal of the senior tranche remains secure.