Consider a total return swap (on a credit-risky bond) of total returns against Libor. The receiver of total return in this swap has a position that is equivalent to

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The receiver of total return in a total return swap effectively gains exposure to both the price movements and income of the underlying asset, similar to holding the asset directly. Additionally, since they pay LIBOR (or another floating rate), it is akin to funding the purchase of the asset with a floating-rate loan. Thus, this position is equivalent to being long the asset and short a floating-rate note.

Consider a Total Return Swap (On a Credit-Risky Bond) of Total