Stripped Assets

Stripped assets refer to financial assets that have been separated into different parts or "tranches," each with distinct rights to income and risk. Often used in structured finance, this process isolates specific cash flows—like interest payments or principal—so investors can choose a tranche that matches their risk appetite. For example, a mortgage-backed security might be "stripped" into one part that receives regular interest payments and another that gets principal repayments. This allows investors to tailor their investments, though it can also increase complexity and risk, especially if the underlying assets perform poorly.