Silvia
Sun Aug 11 2024
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5 answers
1473
Does strip have interest rate risk?
Could you please clarify if the term "strip" in the context of this question refers to a specific financial instrument or product? Generally, the concept of "interest rate risk" applies to financial instruments whose value is sensitive to changes in interest rates. However, without knowing the exact nature of the "strip" being referred to, it's difficult to give a definitive answer. Assuming "strip" refers to a type of bond or debt instrument that has been stripped of its coupons or interest payments, such as a stripped Treasury bond or a stripped mortgage-backed security, then yes, such instruments would indeed be subject to interest rate risk. This is because their market value would fluctuate in response to changes in the prevailing interest rates, affecting the present value of their future cash flows. On the other hand, if "strip" refers to a completely different type of financial product or instrument that does not involve interest payments or cash flows, then the question of whether it has interest rate risk would not be applicable. Could you please provide more context or clarify the specific type of "strip" being referred to in your question?
