Which type of debt is characterized by a higher risk and higher yield?

High yield subordinate debt represents a category of debt that offers higher returns to investors due to the increased risk associated with it. This type of debt is lower in the priority of repayment compared to senior debt, meaning that in the event of a company's liquidation or bankruptcy, holders of this debt are repaid only after senior debt holders have been satisfied. Because of this subordinate position, investors demand a higher yield as compensation for the additional risk they are taking on.

Furthermore, this classification encompasses bonds that are rated below investment grade, signifying a greater probability of default. The higher yields of high yield subordinate debt are attractive to investors who are willing to accept more risk in hopes of achieving greater returns. This is crucial for portfolio diversification and aligns with investors’ timing and risk appetites.

In contrast, senior debt generally carries lower yields due to its secured nature and priority in repayment. Common equity relates to ownership stakes in a company but doesn't entail fixed returns like debt. Quasi equity serves as financing that has characteristics of both debt and equity but doesn’t typically reflect the same risk and yield profile as high yield subordinate debt.