total return swap
total return swap (TRS)
A total return swap or total rate of return swap is a bilateral contract where one party receives the total return on a reference asset in exchange for paying the other party a periodic cash flow, typically a floating rate such as a LIBOR-based rate. The reference asset may be a single asset or a basket of assets or an index. A total rate swap is similar to a plain vanilla swap except that a total return (that is, the cash flows from the reference asset, such as interest, as well as any capital gains and losses) is exchanged, not just the cash flows.
A key feature of a total rate swap is that the parties do not transfer actual ownership of the reference asset, as occurs in a repo. This allows greater flexibility and reduced up-front capital to execute a trade. This also means a party to a total return swaps can be more highly leveraged, making total return swaps a favourite of hedge funds.
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+ total return swap (TRS)
USA
A type of derivative that replicates the cash flows of an investment in an asset (usually a security, basket of securities, index or other financial instrument). A TRS requires the parties to make payments to each other based on the performance of the underlying asset. Under a TRS, one party, Party A, receives payment from the other, Party B, based on the appreciation in value of the asset(s) over a certain specified period (often monthly) or makes payments to Party B based on a decline in value of the asset during the specified period. This type of arrangement is often referred to as a synthetic investment. A TRS permits Party A to simulate investment in the underlying asset(s) without incurring the burden of ownership of the asset(s), including any adverse balance-sheet implications. The TRS simultaneously permits Party B to protect itself against a decline in value of the underlying asset(s).
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Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

Look at other dictionaries:

  • Total return swap — Total return swap, or TRS (especially in Europe), or total rate of return swap, or TRORS, is a financial contract which transfers both the credit risk and market risk of an underlying asset. Contract definition Let us assume that one bank (bank… …   Wikipedia

  • Total Return Swap — Zahlungsflüsse eines Total (Rate of) Return Swaps Beim Total (Rate of) Return Swap (TRORS oder TRS) wird der Ertrag des zu Grunde liegenden Finanzinstruments gegen einen anderen Ertrag getauscht. Hintergründe Ein Total Return Swap ist ein… …   Deutsch Wikipedia

  • Total Return Swap — A swap agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains.… …   Investment dictionary

  • Total return swap — Le total return swap ou TRS, appelé en français dérivé de crédit sur transfert de rendement, est un produit dérivé qui transfère l intégralité de la performance d un actif détenu en échange d une référence variable. Le détenteur d un titre… …   Wikipédia en Français

  • total return swap — noun A financial derivative, which transfers both the credit risk and market risk of an underlying asset. Syn: TRS …   Wiktionary

  • total rate of return swap — total return swap (TRS) A total return swap or total rate of return swap is a bilateral contract where one party receives the total return on a reference asset in exchange for paying the other party a periodic cash flow, typically a floating rate …   Law dictionary

  • Total (Rate of) Return Swap — Zahlungsflüsse eines Total (Rate of) Return Swaps Beim Total (Rate of) Return Swap (TRORS oder TRS) wird der Ertrag des zu Grunde liegenden Finanzinstruments gegen einen anderen Ertrag getauscht. Hintergründe Ein Total Return Swap ist ein… …   Deutsch Wikipedia

  • Total Rate of Return Swap — Zahlungsflüsse eines Total (Rate of) Return Swaps Ein Total (Rate of) Return Swap (TRORS oder TRS) ist ein Kreditderivat, bei dem die Erträge und Wertschwankungen des zu Grunde liegenden Finanzinstruments (Basiswert oder Referenzaktivum) gegen… …   Deutsch Wikipedia

  • total return swaps — A type of credit derivative instrument. Swap contracts in which the protection buyer sells the total return from a particular reference asset such as a corporate loan or bond. In exchange, the protection buyer receives a rate of interest such as… …   Financial and business terms

  • total rate of return swap — or TROR swap. See total return swaps …   Financial and business terms

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