In the wake of the financial crisis, pension funds in many jurisdictions have been struggling with below-par funding ratios and the resultant simultaneous need to take on more risk while shelling out less of their balance sheet.
A total return swap (TRS) is one way of getting that exposure without the initial capital outlays (see figure 1 and box, page 35). The return on some given reference asset - coupons, dividends and mark-to-market changes - is swapped in exchange for a floating rate, usual
The week on Risk.net, October 6-12, 2017Receive this by email
- SGX, HKEX expect to be among first wave of Mifid II equivalence
- Quantile, TriOptima face off in cleared swaps compression battle
- Leaked EU doc could shield legacy swaps from clearing grab
- ABS set for revival under US Treasury’s liquidity buffer plans
- Quants stymied by lack of alternative risk premia flows data