Filter by Categories
Accounting
Banking

Derivatives




Cash-Settled Equity Swap


A type of credit derivative in which the two counterparties agree to exchange the total return on a specified asset (like a corporate bond) or a portfolio of assets for a floating rate plus a given spread, over a specific period. At expiration date, a payment reflecting the change in the value of the asset should be made. For example, if the asset value increases by 5% over the life of a cash-settled equity swap, the corresponding dollar amount should be paid by the payer to the receiver at the end of its life. Typical assets whose performance is referenced in such swaps are corporate bonds, loans and equities.

This swap is also known as a total return swap (TRS), total rate of return swap, or TRORS for short.



ABC
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*