Total Return Swap
A total return swap (TRS) is a bilateral financial contract in that one counterparty pays out the total return of a specified asset, including any interest payment and capital appreciation or depreciation, in return receives a regular fixed or floating cash flow. Typical reference assets of total return swaps are corporate bonds, loans and equities. A total return swap can be settled at the terminating date only or periodically, e.g., quarterly. For convenience we call the asset's total return a TR-leg and the fixed or floating cash flow a non-TR leg.