Trs Agreement

October 12, 2021

Interest rate risk is higher on the beneficiary side and they can hedge the risk with interest rate derivatives such as futures. Less prevalent, but related, are participatory return swap agreements and reverse rights exchange agreements, which typically include 50% of the return or another specific amount. Reverse swaps include selling the asset with the seller and then buying the returns, usually on stocks. The other major advantage of a Total Return swap is that it allows the TRS beneficiary to make a cancelled investment and thus make the most of their investment capital. Unlike a repo transaction which results in a transfer of ownership of assets, a TRS contract does not provide for a transfer of ownership. This means that the Recipient of Total Return does not need to raise significant capital to purchase the asset. Instead, an OEE allows the beneficiary to benefit from the underlying asset without actually owning it, making it the preferred mode of financing for hedge funds and special purpose vehicles (SPVs) .. . . .

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