Equity monetization with total return equity swap

[archived_user]

Hello guys
I ‘m little confused with the total return equity swap
if we suppose that there is no dividends and there is only capital appreciation, then how will the investor pay his leg of the swap or precisely the difference between his total return and the LIBOR
one main objective of managing a concentrated single-asset position is to get liquidity but this swap consume it

 

[archived_user]

not entirely sure of the question but you would be posting collateral for your swap & they usually mark to market at specified intervals so you would be posting cash collateral along the way

 

[archived_user]

Hi
I assumed an illiquid stock that is appreciating (IPO lockup or employment agreement)
just assume that you total return beats the LIBOR repeatedly then this strategy won’t do any good!
correct me if I’m wrong

 

[archived_user]

Yayyywork wrote: not entirely sure of the question but you would be posting collateral for your swap & they usually mark to market at specified intervals so you would be posting cash collateral along the way

As swaps are custom (i.e., OTC) agreements, not exchange-traded agreements, it would be unusual for either party to post collateral.

 

[archived_user]

Javad05 wrote: Hello guys
I ‘m little confused with the total return equity swap
if we suppose that there is no dividends and there is only capital appreciation, then how will the investor pay his leg of the swap or precisely the difference between his total return and the LIBOR
one main objective of managing a concentrated single-asset position is to get liquidity but this swap consume it

The swap could consume it. Or it could provide it.
You pays your money and you takes your chances.

 

[archived_user]

S2000magician wrote:
As swaps are custom (i.e., OTC) agreements, not exchange-traded agreements, it would be unusual for either party to post collateral.

fair enough thanks for clearing that up

 

[archived_user]

My pleasure.

 

[archived_user]

Thank you guys

 

[archived_user]

You’re welcome.