DEFINITION of 'Swap Transferring Risk With Participating Element  STRIPE'
A specific type of hedging technique. STRIPEs combine interest rate swaps and interest rate caps in order to protect the borrower from changes in interest rates. Under this arrangement, the balance of a loan is split between a fixed rate and a floating rate with a cap.
Next Up
BREAKING DOWN 'Swap Transferring Risk With Participating Element  STRIPE'
STRIPEs provide a partial hedge to interest rate changes in either direction. If rates increase, the lender will profit from the portion of the loan covered by the cap. If they fall, then the lender, who would take a fixedrate receiver position, would also be protected against a loss.
RELATED TERMS

Bond Market Association (BMA) Swap
A type of swap arrangement in which two parties agree to exchange ... 
Delayed Rate Setting Swap
An exchange of cash flows, one of which is based on a fixed interest ... 
Capped Rate
An interest rate that is allowed to fluctuate, but which cannot ... 
FixedForFloating Swap
An advantageous arrangement between two parties (counterparties), ... 
Extendable Swap
An exchange of cash flows between two counterparties, one of ... 
Swap Rate
The rate of the fixed portion of a swap as determined by its ...
Related Articles

Investing Basics
How Are Interest Rate Swaps Valued?
When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps. 
Options & Futures
Managing Interest Rate Risk
Learn which tools you need to manage the risk that comes with changing rates. 
Investing
What's an Interest Rate Swap?
An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount. 
Investing Basics
Managing Interest Rate Risk
Interest rate risk stems from the possibility that an interestbearing assetâ€™s value will change due to changing interest rates. 
Investing Basics
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
Investing
How To Read Interest Rate Swap Quotes
Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Professionals
Currency Swaps
CFA Level 1  Currency Swaps. Discusses the features of a currency swap. Learn how comparative advantage affects the payments made during a swap agreement. 
Entrepreneurship
Square vs. Stripe (SBUX, TWTR)
Square and Stripe are transforming payment processing. However, while similar in many ways, the companies do have their fair share of differences. 
Trading Strategies
Interest Rate Swaps Explained
Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Professionals
Interest Rate and Equity Swaps
CFA Level 1  Interest Rate and Equity Swaps. Learn the components of plain vanilla interest rate swaps and equity swaps. Contains sample calculations finding the payments for each swap.
RELATED FAQS

What is an absolute rate?
An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >> 
Can individual investors profit from interest rate swaps?
Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >> 
What are interest rate swaps on the OTC market?
Learn about interest rate swaps and how they are traded over the counter, and understand the impact of DoddFrank on swaps ... Read Answer >> 
How do companies benefit from interest rate and currency swaps?
An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >> 
Which of the following strategies is (are) appropriate? I. If a borrower has a fixed ...
The correct answer is: a) (II) is incorrect because if an investor has floating rate assets and is expecting interest rates ... Read Answer >> 
Which is better, a fixed or variable rate loan?
A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>