Interest Only Strip
Contents
Definition
Interest Only Strip. A strip that represents the non-principal portion of the monthly payments on the underlying debt instrument, such as a bond. An interest-only strip holder is interested in rising rates and no prepayment, as prepayment would cause them forfeit future interest payments and receive nothing from the return of the principal.
Example
An interest-only strip can be reintegrated into other synthetic or engineered products. For example, interest-only strips can be pooled to create or make up a portion of a larger collateralized mortgage obligation (CMO), asset-backed security (ABS) or collateralized debt obligation (CDO) structure.
Synonyms
- Io Strip
Disclaimer
This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.
