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Topic: Total return swap

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	Swap (finance) - ArticleWiki
		Swaps can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the underlying prices.
		A total return swap is a swap in which party A pays the total return of an asset, and party B makes periodic interest payments.
		Note that if the total return is negative, then party A receives this amount from party B. The parties have exposure to the return of the underlying stock or index, without having to hold the underlying assets.
	articlealley.co.uk /wiki/index.php/Swap_(finance) (955 words)

	Swap (finance) - Wikipedia, the free encyclopedia
		A total return swap is a swap, where party A pays the total return of an asset, and party B makes periodic interest payments.
		Note that if the total return is negative, then party A receives this amount from party B. The parties have exposure to the return of the underlying stock or index, without having to hold the underlying assets.
		An equity swap is a special type of total return swap, where the underlying asset is a stock, a basket of stocks, or a stock index.
	en.wikipedia.org /wiki/Swap_(finance) (676 words)

	Untitled Document
		Investor pays quarterly to the Swap Counterparty an amount equal to the LIBOR rate multiplied by $1 million and multiplied further by a fraction, the numerator of which is the number of days in the quarter and the denominator of which is 365.
		Swap Counterparty pays quarterly to Investor the amount that the Investor would have received in distributions from the Fund had the Investor invested $1 million in the Fund on the date the TRIPS was entered into.
		In this way, the Swap Counterparty is in the same position economically that it would have been in had the Investor borrowed $1 million from the Swap Counterparty at the LIBOR rate and then invested the proceeds of the loan in the Fund itself.
	www.mfainfo.org /neo_apps/article/article1.asp?article_id=1251&adate=3/1/2000 (1332 words)

	[No title]
		Total Rate of Return Swap) is a contract between two 3 counterparties whereby they 6 swap periodic payments 5 for the period 8 of the contract.
		The total 7 return swap protects 5 the against loss 6 of value irrespective of 2 cause, whether default, widening 8 of credit spreads 9 or anything else.
		The Credit default swap or CDS 7 has become the main 5 engine of the credit 8 derivatives market, offering 4 liquid price discovery and 7 trading on which 8 the rest of the 2 market is based.
	www.cleog.com /credit_default_swap_.htm (639 words)

	Treatment of Credit Derivatives in Principle I (Site not responding. Last check: )
		a total return swap must be split up into two legs: a position in the reference asset (security component) and one from the interest component (financing component), which must be included as fictious floating rate note or fixed-interest security, depending on the form of the swap.
		In the case of a total return swap, both the protection buyer and the protection seller may be affected by a failure of the counterparty, depending on the development of the value of the reference asset.
		Total return swaps generate a synthetic position in the reference asset so that it must be assumed that the development of the value is primarily determined by the same factors as the reference asset.
	bakred.de /texte/rundsch/rs10_99e.htm (5692 words)

	US Office of the Comptroller of the Currency: Quarterly Journal: Interpretations--October 1 to December 31, 2000 (Site not responding. Last check: )
		In your letter, you assert that a total return swap transaction hedged by a long, trading book position in the reference asset is "matched" during the term of the swap, and therefore, the bank has no specific risk exposure to the reference asset during that time period.
		In your letter you assert that during the life of the swap, the desk's exposure to the reference asset is fully hedged under the terms of the swap.
		The OCC agrees that during the term of the swap the desk's exposure to the reference asset is fully hedged or matched and that a specific risk capital requirement is not necessary.
	www.findarticles.com /p/articles/mi_qa3887/is_200103/ai_n8937673 (1488 words)

	Finsoft Ltd
		Total return swaps are contracts between two counterparties, under which the total economic risk of ownership of a designated asset or set of assets is transferred from one counterparty to the other.
		The difference between a total return swap and a default swap is that a default swap simply transfers credit risk, typically by reference to some designated reference asset, whereas a total return swap transfers what is, in effect, all the risks of owning the designated asset.
		The difference is that with an asset swap package the holder of the bond to be swapped retains the bond issuer's credit risk, whereas with a total return swap the holder of the bond passes that credit risk on to some other party.
	www.finsoft.com /solutions/forum_article02.htm (1622 words)

	TheStreet.comTheStreet.com : Print Story - The Killer App for Single-Stock Futures
		In a bond swap transaction, a fixed-rate payer borrows at a fixed rate and lends at a floating rate; he is said to be short the bond and long the swap.
		The total return stream is shifted toward capital appreciation, and that lengthens the effective duration of a stock in the same manner that lower coupon yields increase the effective duration of a bond.
		The calculation of total return for a dividend-paying stock involves making assumptions about reinvestment costs, including both commissions and bid/ask spreads, whether the dividend is received in cash or reinvested in the stock, and what the effective tax rate is for the dividend.
	www.thestreet.com /pf/options/futuresshocktsc/10057734.html (1236 words)

	Re: Are Credit Derivatives For REal?
		The default swap market can be quite illiquid, but can also accomodate substantial size and customization when you are willing to work with a dealer to achieve the desired credit protection or exposure.
		Total return swaps are often used by hedge funds to gain access to odd securities, to simply operationally intensive trades, but mostly to gain leverage.
		The cost of the total return swap is similar in concept to funding the security position.
	www.contingencyanalysis.com /archive/archive3/0000002e.htm (480 words)

	[No title]
		The hedge payment may be a total return generated by the first total return swap and the counterparty may receive from the party sponsoring the deferred compensation plan a total return swap fee.
		Specifically, the tax treatment of the parties to a swap is unclear where the equity with respect to which the respective counterparties' obligations are calculated is the stock of one of the counterparties to the swap.
		An equity swap generally would be deemed to be terminated (or partially terminated) to the extent that the parties to the swap changed the equity with respect to which the parties' obligations under the swap contract were calculated.
	tax.aicpa.org /NR/rdonlyres/7F9601EE-579C-4C02-B44F-F087932005D3/0/patent_on_hedging.doc (6844 words)

	Total Return Swap
		In total return swaps, the underlying asset, referred to as the reference asset, is usually an equity index, loans, or bonds.
		Total return swaps allow the party receiving the total return to gain exposure and benefit from a reference asset without actually having to own it.
		In a total return swap, the party receiving the total return will receive any income generated by the asset as well as benefit if the price of the asset appreciates over the life of the swap.
	www.investopedia.com /terms/t/totalreturnswap.asp (463 words)

	Introduction to Credit Derivatives - Total Return Swaps
		A total return swap is considered a type of credit derivative, and it is fundamentally a form of financing.
		The investor is the receiver of the total return on a reference asset/s including interest capital gains/losses or other economic benefits during the pre-defined payment period.
		Total return swaps are popular with hedge funds due to the leverage they provide.
	www.tavakolistructuredfinance.com /trs.html (275 words)

	AMP Capital Investors — Total Return Fund
		A total return swap (Swap) between the Fund and BNP Paribas, a major European bank, is used to obtain economic exposure to the performance of a portfolio of hedge funds (called the Notional Portfolio).
		The Swap facilitates leveraged exposure to the Notional Portfolio, expected to be 1.5 to 2.5 times.
		To provide a total return, after all management and performance fees, higher than the return of the RBA Cash Rate on a rolling 3 year basis.
	www.ampcapital.com.au /advisers/alternative/total_return_fund.asp (237 words)

	Welcome to CreditTrade (Site not responding. Last check: )
		A Total Return Swap ("TRS") is a catch-all term for any swap where one party agrees to pay the other the total return of a defined asset in return for receiving a stream of, typically, Libor based cash flows.
		Note also that while the swap is designed to strip off the credit risk of a third party, the two parties to the swap assume the credit risk of each other defaulting.
		The difference between a TRS and a Credit Default Swap ("CDS") is that the latter simply transfers credit risk, typically by reference to some designated reference asset, whereas a TRS transfers what is, in effect, all the risks of owning the designated asset.
	www.credittrade.com /home/education/trs.aspx (1116 words)

	Total Return Swap (TRS)
		A Total Return Swap (TRS) is a bilateral financial transaction where the counterparties swap the total return of a single asset or basket of assets in exchange for periodic cash flows, typically a floating rate such as LIBOR +/- a basis point spread and a guarantee against any capital losses.
		A TRS is similar to a plain vanilla swap except the deal is structured such that the total return (cash flows plus capital appreciation/depreciation) is exchanged, rather than just the cash flows.
		Total Return Swaps (TRS) are also known as Total Rate of Return Swaps (TROR).
	www.financial-edu.com /total-return-swap-trs.php (725 words)

	Product - Total Return Swaps
		For swaps involving portfolios and specific funds, future capital call obligations may also be assumed by the receiver of private equity returns (the “Payee”) from the payor of private equity returns (the “Payor”).
		Swaps can be executed immediately enabling portfolio managers to quickly adjust private equity exposure, since swaps represent the economic returns and not the legal transfer of the underlying securities (e.g.
		For swap payors (the payor of private equity returns), swap transactions may occur at prices representing lower discounts to net asset value vs. comparable “cash” secondary private equity transactions.
	www.offroadcapital.com /Swaps.aspx (647 words)

	[No title]
		In your letter, you assert that a total return swap transaction hedged by a long, trading book position in the reference asset is “matched” during the term of the swap, and therefore, the bank has no specific risk exposure to the reference asset during that time period.
		In your letter you assert that during the life of the swap, the Desk’s exposure to the reference asset is fully hedged under the terms of the swap.
		The OCC agrees that during the term of the swap the Desk’s exposure to the reference asset is fully hedged or matched and that a specific risk capital requirement is not necessary.
	www.occ.treas.gov /interp/oct00/int893.doc (1468 words)

	FRB: Supervisory Letter SR 96-17 (GEN) on supervisory guidance for credit derivatives -- August 12, 1996
		In some cases, such as total rate of return swaps, the guarantor also is exposed to the credit risk of the counterparty, which for derivative contracts generally is measured as the replacement cost of the credit derivative transaction plus an add-on for the potential future exposure of the derivative to market price changes.
		The guarantor in a TROR swap could be viewed as having synthetic ownership of the reference asset since it bears the risks and rewards of ownership over the term of the swap.
		Thus, a TROR swap differs from a standard direct credit substitute in that the guarantor is guaranteeing not only against default of the reference obligor, but also against a deterioration in that obligor's credit quality, which can occur even if there is no default.
	www.federalreserve.gov /boarddocs/SRLETTERS/1996/sr9617.htm (5303 words)

	Dominion Resources Page 51
		The notional amount of the swaps is based on the purchase price of the securities which are acquired by the swap counter-parties.
		Total return swap transactions require additional funding of or return of cash collateral resulting from decreases or increases in the fair market value of the swap position.
		Total return swap cash collateral is included in cash and cash equivalents on the balance sheet.
	www.dom.com /investors/annual98/dompg51.htm (939 words)

	Total Return Equity Swaps and Equity Forwards
		A total return equity swap or a total return swap (TRS) on an equity is similar to a total return swap on a bond.
		The equity used in a total return swap contract can be a single publicly traded stock or a private stock, a portfolio of stocks, a stock index, or even any market index.
		The following examples are given for the valuation of total return swaps on a local equity, currency-translated equity and quanto equity using the above functions.
	www.fincad.com /support/developerFunc/mathref/equity_trs.htm (1645 words)

	Credit Derivative
		total return swap: Two parties enter an agreement whereby they swap periodic payment over the specified life of the agreement.
		For example, a note might provide for principal repayment to be reduced below par in the event that a reference asset defaults prior to the maturity of the note.
		The fundamental difference between a credit default swap and a total return swap is the fact that the credit default swap provides protection against specific credit events.
	www.riskglossary.com /articles/credit_derivative.htm (497 words)

	ABASA: CREDIT DERIVATIVES FOR BEGINNERS: How Credit Derivatives are Being Used (Site not responding. Last check: )
		Alternately stated, the desire may be to effectively remove all economic exposure to an underlying asset for a given term, and perhaps to effect the transfer with confidentiality and without the need for a cash sale.
		The maturity of the swap does not have to match the maturity of the underlying asset.
		The TR Receiver in a swap with maturity less than that of the underlying asset may benefit from the positive carry associated with being able to roll forward short-term financing of a longer term investment.
	www.aba.com /ABASA/abasa_creditderivatives4.htm (432 words)

	Synthetic Securitisation: the Cayman Islands Perspective
		In return for regular payments made by the Originator to the counterparty, the counterparty agrees to make a payment to the Originator upon the occurrence of a credit event in relation to the Reference Assets.
		The effect of the Total Return Swap is to fully transfer the entire economic interest of holding the assets to the counterparty.
		Credit Linked Notes are instruments by which a credit default swap or a total return swap can be packaged into securitised form, and they are accordingly pre-funded by the counterparty/investor.
	www.securitization.net /knowledge/spv/synthetic.asp (1773 words)

	dominion page 51
		The notional amount of the swaps is based on the purchase price of the securities to be acquired by the swap counterparties.
		The gains or losses from the sale, settlement or mark to market of the total return swaps are recorded in Operating revenue and income — Other in the income statement.
		Earnings due to swap transactions were $18 million and $8 million in 1999 and 1998, respectively.
	www.dom.com /investors/annual99/domfp51.html (945 words)

	Wilmott Forums - Total Return Swaps (Site not responding. Last check: )
		You have a reference asset and you swap all returns (market value change and coupons) into some other (usually floating rate).
		Total Rate of Return Swaps ("TROR") on bonds are off balance sheet synthetic repo transactions....the TROR receivers tend to be:
		It essentially generates a uncrackable balance sheet (or one that is computationally infeasible to crack (its a NP Problem)).
	www.wilmott.com /messageview.cfm?catid=4&threadid=7630 (664 words)

	Swap
		Traditionally, the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed.
		Recently, swaps have grown to include currency swaps and interest rates swaps.
		Swaps - More detail on using a swap.
	baystreet.investopedia.com /terms/s/swap.asp (95 words)

	Glossary - Quanto Financial Technology (Site not responding. Last check: )
		It is normally used to compare the return of investment manager because the method eliminates the distorting effects of the inflows of new money.
		When calculating, the effect of varying cash inflows is eliminated by assuming a single investment at the beginning of a period and measuring the growth or loss of market value to the end of the period.
		(2) For mutual funds, it is a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund.
	www.equanto.com /glossary/t.html (1782 words)

	Vinod Kothari's credit derivatives website
		Every credit asset is a bundle of risks and returns: every credit asset is acquired to make certain returns on the asset, and the probability of not making the expected return is the risk inherent in a credit asset.
		And both have also diversified their returns, as the fees being earned by the derivative contract is a return from the portfolio held by the other bank.
		As the name implies, a total return swap is a swap of the total return out of a credit asset against a contracted prefixed return.
	www.credit-deriv.com /creprime.htm (929 words)

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