I just know these products recently: Performance Total Return Swap (TRS), Performance Fixed TRS and Performance Float TRS.

But cannot find a detailed explanation of the product, all I can find is an introduction about performance swap: https://www.investment-and-finance.net/derivatives/p/performance-swap.html and the introduction of total return swap: https://www.investopedia.com/terms/t/totalreturnswap.asp

While I am confused about how these to combine into one product? And why do people use them?

Any books/references would be highly appreciated! Thanks for your help!


1 Answer 1


A "relative performance TRS" is a combination of two partly offsetting TRSs, for example Alice sells a TRS on a credit risk-tree or less risky bond, Alice buys a TRS on a riskier bond of similar maturity (which has lower price or pays more coupon), and Alice collects the difference in coupon payments (approximately the credit spread, the difference of bonds' yields) (unless some bond defaults). If both bonds pay fixed coupon, then the two legs mostly cancel the interest rate risk. I don't recal the expressions "Performance Fixed TRS and Performance Float TRS", but I would guess it has to do with bonds paying fixed or floating coupon.

Another example, Alice has USD 3 billion in US equities. To diversify, Alice sells 2 billion TRS on S&P 500, and buys 1 billion TRS on CAC40 and 1 billion TRS on DAX.

For simplicity, Alice probably faces the same counterparty Bob on both legs.

It's similar to contract for difference (CFD), but you have intermediate cash flows, rather than just one at the end.

  • 1
    $\begingroup$ Maybe "performance vs float TRS" meaning you swap the return on the asset against for ex. Libor+X and "performance vs fixed TRS" means you swap the return on the asset against a fixed (say y%) rate. Most TRS are the former kind, AFAIK. $\endgroup$
    – nbbo2
    Mar 19, 2022 at 19:31
  • $\begingroup$ I should have also mentioned that for simplicity, Alice probably faces the same counterparty Bob on both legs. I don't know what people mean by floating swap.. Maybe sell one floater and buy anoner linked to another alternative index, e.g. SOFR v BSBY or AMERIBOR? but I don't think there are a lot of floaters linked to alternative indicex. $\endgroup$ Mar 19, 2022 at 23:00

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