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Total return swap
A swap in which one of the counterparties transfers to another party the return (interest, dividends and increase/loss in value) associated with a given asset, asset portfolio or index, in exchange for payments established on the basis of a fixed or floating interest rate.
The total return payer pays the total return receiver any positive effective return on the asset, asset portfolio or index and receives, in return, interest calculated either at a specified fixed rate or based on a floating rate index such as LIBOR, plus a margin. If the return on the asset, asset portfolio or index is negative, the total return receiver pays the total return payer the amount by which the asset has fallen in price.
Translations
Synonyms and variations
- Total rate of return swap
- Total return payer
- Total return receiver
- TROR swap
- TRORS