How does a CDS index create leverage?

[afterworkguinness]

Gregory states that tranching creates leverage, but I don't understand his explanation.

"Tranching creates a leverage effect since the more junior tranches carry more risk than the index whilst the most senior tranches have less risk."

They way I understand it, I invest 10MM to go long a CDS index equity tranche and sell protection. My position will get wiped out by the first n number of defaults. I don't see the leverage.

 

[afterworkguinness]

For anyone who is interested, I came across an answer. Leverage exists because by investing $x in the tranche, I have a position that is equivalent to Δtranche * a position in the underlying index. Δtranche is the tranche delta; same concept as option delta.