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Total rate of return (TROR) swap
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From : bionicturtledotcom
Added: Mar 12, 2008
Like a credit default swap (CDS), a TROR transfers default risk. But unlike a credit default swap, a TROR also transfers credit deterioration risk (downgrade) and market risk (aka, price risk; interest rate change). The TROR receiver is synthetically long the reference, the payer is synthetically short the reference. The key advantage to the payer is a lack of funding cost (to buy the reference requires funding) which allows for leverage.
Category : Education
Added: Mar 12, 2008
Like a credit default swap (CDS), a TROR transfers default risk. But unlike a credit default swap, a TROR also transfers credit deterioration risk (downgrade) and market risk (aka, price risk; interest rate change). The TROR receiver is synthetically long the reference, the payer is synthetically short the reference. The key advantage to the payer is a lack of funding cost (to buy the reference requires funding) which allows for leverage.
Category : Education
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