Functioning of derivatives
Functioning of derivatives · 02. June 2024
A Total Return Swap (TRS) is a derivative allowing one party to receive the total return of a credit asset (interest, principal, and capital gains/losses), while the other party receives regular payments based on a fixed or floating rate like EURIBOR. TRS enable credit risk transfer, leveraged exposure to fixed income, and synthetic access to illiquid assets, commonly used for hedging, regulatory capital management, and investment strategies.
Functioning of derivatives · 01. April 2023
Reverse convertibles sound complex but think of them as a two-in-one deal. You get higher interest, but there's a stock bet involved. If the stock stays steady or rises, you enjoy the interest. However, if it drops significantly, you could end up owning that stock instead. You can add a safety layer, called 'hedging', to protect your investment. But remember, while you can earn decent returns, you might miss out on big stock gains.
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