A swap transaction in which one party agrees to pay the full return (including the income and profit from change in the capital value of the asset) on a particular reference asset, such as a specific bond or an equity, issued by a private borrower, with a life longer than the swap, and agrees to receive in return a predetermined amount. It allows to transfer the total economic risk of holding the assets without necessarily buying or selling the underlying assets.
a derivative instrument that allows an investor to receive the total economic return of an asset (income plus or minus any change in capital value) without actually buying the asset
a means to transfer the total economic exposure, including both market and credit risk, of the underlying asset
a swap, where party A pays the total return of an asset , and party B makes periodic interest payments
Any swap in which the non-floating rate side is based on the total return of an equity or fixed income instrument with a life longer than the swap. Total return swaps are most common in equity or physical commodity markets, but they can be used in fixed income markets where the non-domestic holder of a fixed income security would be subject to a withholding tax, but where the withholding tax may be avoided if the debt instrument is held by a domestic investor who pays the total return to a foreign investor by way of a total return swap. Total return swaps are also used to transfer credit exposure.
A type of credit derivative in which one counterparty receives the total return (interest payments and any capital gains or losses) from a specified reference asset and the other counterparty receives a specified fixed or floating cash flow that is not related to the creditworthiness of the reference asset. Also called Total Rate of Return Swap, or TR Swap.
Total return swap, or total rate of return swap, or TRORS, a contract in which one party receives interest payments on a reference asset plus any capital gains and losses over the payment period, while the other receives a specified fixed or floating cash flow unrelated to the credit worthiness of the reference asset, especially where the payments are based on the same notional amount. The reference asset may be any asset, index, or basket of assets.