stripping

: to divide (a debt security) into separately traded securities entitling the owner usually to either principal or interest alone from the obligation

: a security traded separately from another after stripping; specifically : a derivative mortgage-backed security created by the segregation of cash flow from the underlying mortgages or other mortgage-backed securities and entitling the investor to a specified percentage (as 100 percent) of the interest or principal paid : a derivative mortgage-backed security created by the segregation of cash flow from the underlying mortgages or other mortgage-backed securities and entitling the investor to a specified percentage (as 100 percent) of the interest or principal paid

: a Treasury security that entitles the investor usually to payment of interest or principal exclusively and that is registered in a Federal Reserve bank under a federal program that provides for such separate trading of the components of U.S. Treasury obligations — compare zero-coupon bond at bond 2