May 062019

A bilateral financial contract in which the total return of a specified asset is exchanged for another cash flow. One counterparty (the TR payer) pays the total return (interest plus fees plus price appreciation less price depreciation) of a specified asset, the reference obligation, and (usually) receives Libor plus a spread from the other counterparty (the TR receiver). Price appreciation or depreciation may be calculated and exchanged at maturity or on an interim basis. Allows investors to exchange the total economic returns of an asset for fixed or floating interest payments or vice versa. They provide a synthetic method to access off balance sheet assets or manage portfolio risk more efficiently

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