Total Return Swap
Total Return Swap (TRS) is a bilateral derivative contract in which one party receives the total return of a reference asset (income plus price change) and pays a financing cost to the other party. No ownership of the reference asset changes hands.
Example: In a TRS, Party A receives the total return of a bond index (income plus price change) and pays a financing rate to Party B on a quarterly settlement schedule, with no transfer of bond ownership.
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