A total return swap involves exchanging an obligation to pay interest at a specified rate for payments representing the total return on a loan or a bond of a specified amount.

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A total return swap is a type of swap in which one party agrees to pay the total return on a particular asset (such as a bond or loan) to another party in exchange for a fixed or floating rate payment. This can be used by investors to gain exposure to a particular asset without owning it outright, or to hedge against changes in the asset's value.

A Total Return Swap Involves Exchanging an Obligation to Pay