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elearning > Total return swaps

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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 menuTotal return swaps how they workTotal return swaps payments

Total return swaps fundingTotal return swaps riskTotal return swaps risk 2

  • 30 minutes
  • 8 question multiple choice
  • 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

Total Return Swaps - the details

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

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