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 total return 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 total return swaps are corporate bonds, loans and equities.

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