Equity monetization with total return equity swap

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

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


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

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

The swap _ could _ consume it. Or it could provide it.

You pays your money and you takes your chances.

fair enough thanks for clearing that up

My pleasure.

Thank you guys

You’re welcome.