STRIPS, Coupon Stripping, and Certificates

Fixed-income terms for coupon stripping, stripped bonds, stripped coupons, STRIPS, and certificate-style instruments.

STRIPS, coupon stripping, and certificate terms describe securities or receipts created by separating or repackaging bond cash flows.

Use this branch when a bond’s coupon and principal cash flows are split, stripped, or converted into zero-coupon-like claims.

Key Terms in This Branch

TermWhat it clarifies
Coupon StrippingSeparating coupon payments from principal claims.
Stripped BondA bond whose cash flows have been separated.
Stripped CouponA separated coupon cash-flow claim.
STRIPS BondsSecurities tied to separate trading of registered interest and principal cash flows.
Variable Rate Certificate of DepositA variable-rate certificate term included near fixed-income certificate structures.

Common Mistakes

  • Ignoring the high duration of zero-coupon-like cash flows.
  • Treating stripped coupons and principal strips as identical risk exposures.
  • Comparing stripped securities without tax and accrual treatment.
  • Assuming a certificate label means the same liquidity as a Treasury security.

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