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elearning > Total return swaps
Learn about the following:
How a total return swap works. How banks make money from total return swaps. Why total return swaps are used. The risks total return swaps generate.
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Course Summary
Total Return Swaps
- How a total return swap works
- How banks make money from total return swaps
- Why total return swaps are used
- The risks total return swaps generate
30 minutes
8 question multiple choice test
1. How total return swaps work
- Role of bank and customer
- Example of trade
- Risk transfer, (credit and market risk)
2. Why firms enter total return swaps
- How banks make money
- An unfunded risk for the customer
- How the customer gains or loses
- Why the bank is hedged
- What happens if there is a credit event
3. The risks total return swaps create
- Credit risk for customer (credit protection seller)
- Credit risk for bank on customer (credit protection buyer)
- Reducing counterparty credit risk, margins and collateral
- Maturity of total return swap and risk
4. Summary
5. Test
Related Documents
Training Courses > Interest Rate & Currency Swaps 
Market Guides > Interest rate swaps 
20th September 2009
When two parties agree to enter an interest rate swap (IRS) one party pays a fixed rate of interest and the other a variable rate. The variable rate is often referenced to Libor or Euribor. The interest payments are based on a notional amount, (with IRS no principal amount changes hands). In the market there are conventions for calculating the interest payments. For example USD IRS use an annual actual 360 interest rate calculation for the fixed payment and a quarterly or semi annual actual 360 calculation for the floating payment. Maturities are normally between 2 and 20 years but it is possible to trade swaps that have maturities exceeding 50 years. Customers using swaps to hedge can expect a dealer to quote a dealing spread. The dealer will want to receive a higher fixed rate than the one they pay. It's one way the dealer makes money from trading. Dealers will insist before trading that the appropriate documentation is signed. For swaps standard documentation is provided by the International Swaps and Derivatives Association (ISDA). This document is called a master agreement. It covers all swaps between the two parties. Individual transactions are then agreed by confirmation which refers to the master agreement.
Short courses>Asset swaps 
Short courses>Currency swaps
Short courses>Interest rate swaps
elearning > Credit default swaps
Learn about the following: How credit default swaps work. The basic terminology of credit trading. How credit default swaps can be used. The risks and problems with credit default swaps.