Stripped Yield


DEFINITION of 'Stripped Yield'

A measure of the non-collateralized, independent return of a bond or warrant after all the monetary incentives and features have been removed. Stripped yields measures the return on only the debt portion of a bond/warrant. By removing additional features, investors can determine meaningful comparisons between convertible and non-convertible securities and debt instruments.

BREAKING DOWN 'Stripped Yield'

For example, by removing the built-in interest features and principal guarantees present in old Brady bonds, investors were able to immediately comprehend the underlying risk of the issue. Evaluating the stripped yield is also helpful in assessing many of today's debt securities, which feature embedded call options, "stepped" (increasing) coupons and the like.

  1. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  2. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  3. Brady Bonds

    Bonds that are issued by the governments of developing countries. ...
  4. Yield

    The income return on an investment. This refers to the interest ...
  5. Cushion Bond

    A type of callable bond that sells at a premium because it carries ...
  6. Zero-Coupon Bond

    A debt security that doesn't pay interest (a coupon) but is traded ...
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