What is the defination of equity?

Equity is the residual interest in anything after all the debts are satisfied. Thus your home equity is the amount of money you would have left if you liquidated the house and paid off the mortgage. Equity in a corporation is a similar straight accounting treatment: equity = assets - liabiities (although in accounting neither the assets nor the liabilities are recorded at liquidation value usually). Which leads to equity investing, in which equity is the residual interest in the company after all the obligations and especially the debtholders are paid. Here there is not a straight accounting treatment but a market that tries to value those residual interests in every way imaginable. In the most messed up structured finance deal, the equity tranche is what's left over when all the liabilities of the pool are paid and the assets are liquidated.