Total return swaps allow two parties to exchange the cash flows of an asset. These cash flows include periodic flows (interest, dividends and fees) as well as price change (appreciation/depreciation). The "long" party (below, "Counterparty") in a total return swap has the same cash flows as if they owned the asset directly
Total return swaps can be executed on most asset types including corporate bank loans (term and revolver), corporate bonds, equities, emerging market securities, mutual funds, hedge funds and private equity funds, and indices of all types. This section will focus on total return swaps on individual assets. The following section discusses total return swaps on bond indices.
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