Let me try: Imagine an empty company loans 100 companies $1 each. To get the $100 to loan, that company sells bonds to 2 investors for $50 each. One investor

Let me try: Imagine an empty company loans 100 companies $1 each. To get the $100 to loan, that company sells bonds to 2 investors for $50 each. One investor is senior and one is junior. What this means is that if any of those 100 companies default and don't pay back their loan, then the junior investor loses money. The junior investor loses money until their entire $50 is lost, and only then does the senior investor have to suffer loses. The senior investor therefore only has losses if more than $50 of the total $100 loans is lost. This is basic credit tranching in funded format. Unfortunately things get a lot more complicated when instead of $1 loans, we have $1 credit default swaps, which instead of loaning someone $1, you promise to pay them if a 3rd party company defaults. This trade is DB buying protection from a company on a very senior tranche of this type of trade, but they are buying it leveraged, so for example they buy $100 of protection from a company that has $10 of cash inside (provided by the third-party investors), with a promise to pay more if the tranche deteriorates. As far as rationale, the primary purpose of these trades is to offload super senior risk from DB's balance sheet, which they accrued through doing a different type of trade.