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.

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RELATED FAQS
  1. What is a stripped bond?

    The quick answer to this question is that a stripped bond is a bond that has had its main components broken up into a zero-coupon ... Read Answer >>
  2. Can I use the current yield to compare a bond to an equity investment?

    Learn about the different types of yield measurements for stocks and bonds, and find out how to make careful comparisons ... Read Answer >>
  3. How do I evaluate a debt security?

    Look at a brief overview of the important factors to consider before purchasing a debt security, such as a corporate or government ... Read Answer >>
  4. What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While ... Read Answer >>
  5. How is convertible bond valuation different than traditional bond valuation?

    Read about bond valuation, particularly the differences between how a traditional bond is valued and how a convertible bond ... Read Answer >>
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