shootingstar

ok, haven't revised this chapter, but from what i can remember:

STRIPS are created by the process of taking a coupon-bearing Treasury and stripping it down into all of its different parts.

eg let's take a 5-year coupon-bearing treasury. What actually is this? -- it's a series of 10 coupon payments and then the principal repayment at the end.

Therefore you can "strip" it down into 10 coupon strips with differing maturities, and the principal "strip", and sell those all off separately as 11 zero-coupon securities.

hope that helps.