Total Return Swap


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Total Return Swap

A swap in which the two legs are an interest rate, whether fixed or floating, and the return on a set asset. The second party owns the asset, which is usually a set of loans, bonds, or an equity index. The advantage to a total return swap for the payer of the interest rate is that it allows him/her to benefit from the ownership of the asset without owning it. However, if the asset falls in price over the life of the swap, the payer of the interest rate is required to compensate the owner of the asset for the amount the asset has lost.
References in periodicals archive ?
The total return swap is a special type of credit derivative; the two sides involved in the contract are generally banks and hedge funds.
With respect to a synthetic long position, the following example illustrates how a total return swap over the shares of a publicly traded stock generally would operate.
The first involved a total return swap with another bank client seeking to free up credit lines with a major client.
In particular, MMAC reduced its investment in the leveraged bond portfolio through the termination of 15 total return swap agreements that had a total notional amount of $102.6M and sold one multi-family tax-exempt bond and one subordinate certificate interest in a multi-family tax-exempt bond.
"These innovative products are intended to mimic the economics of a total return swap in futures form, allowing swap dealers and their end customers to avoid higher costs as a result of new swap margin rules," said Tim McCourt, CME Group Global Head of Equity Products.
The fund aims to provide investors with medium to long term capital appreciation through investment of approximately 50 percent of its NAV in a total return swap, which is referenced to the Efficient Capital CTA Index, and the remainder in cash and cash equivalents.
Drilling company Seadrill (Oslo:SDRL.OL) disclosed on Thursday that it has settled a Total Return Swap agreement (TRS) expiring on 3 September 2015 with 4,000,000 common shares in underlying security.
10 October 2011 - Norway's Telenor ASA (OSL:TEL) said that it had amended the terms of the total return swap deal with JP Morgan Securities Ltd, a subsidiary of JP Morgan Chase&Co (NYSE:JPM), by raising the common stake in the Russian VimpelCom Ltd (NYSE:VIP) to 3.99% from 2.45%, the mobile operator VimpelCom said in a statement.
As an Of Counsel at the New York law firm of McDermott Will & Emery LLP, she was instrumental in co-leading an $8 billion foreign exchange/currency trade transaction for Morgan Stanley & Co., Inc., and led a 500 Euros total return swap for Landesbank Baden-Wurttenberg, London Branch, among others.
The total return swap trade was based on Investment Property Databank's (IPD) main Spanish property index.
The total return swap trade was based on Investment Property Databank's (IPD) main Spanish property index, the report said, adding that all other trade details, including the size and tenure of the deal, were kept confidential.