Standardized total
return swaps on Bloomberg
Barclays indices (BTRS)
Trade example & basic mechanics

To illustrate the BTRS quotation convention, pricing and other“mechanics” of these trades, below are several hypothetical examples
from a portfolio manager (PM) perspective who may seek to:• Trade date: March 3, 2017

• Enhance performance (investment)• 1 month LIBOR = 1%

• Initial Index Value as of close Feb 28th = 2500
• Index Value on Trade date March 3rd = 2501

• Hedge existing portfolios• Pre-allocate investment funds to become available in thefuture (e.g., lock up implied financing at an attractive level inanticipation of more funds becoming available next quarter, etc).

BTRS generic payoff function

Assumptions• Libor Accrual = 100,000,000*. LIBOR Rate * Daycount Fraction• Bloomberg Barclays Index: U.S. Corporate index(LUACTRUU index)• Growth Rate: 1% per year• (same rate as our hypothetical Libor reset rates to simplify examples)• Asset accrual — Libor accrual• Asset Accrual = (P1/P0)- 1)*100,000,000
The effect of discounting to present value is neglectedin these examples.
For more details on these cash flow and valuation, on a
Bloomberg Terminal, please press SWPM BTRS <GO>.

Trade 1: PM enhances performance (investment) via BTRS
Deal details
PositionBuy (TR Receiver)

Notional

100,000,000

Index

U.S. Corporate index (LUACTRUU index)

Units

40,000 = 100,000,000/2500

Trade date

March 3, 2017

Initial Index Value

2500

Index value on trade date (March 3rd)2501

Effective date

March 1, 2017

Valuation date

March 6, 2017

Maturity dateJune 1, 2017

Quoted Strike2490

Initial payment-$408,333.33 (i.e., Total Return receiver receives initial payment of $408,333.33)
TR leg accrual – LIBOR leg accrual= (100,0000,000) *{ [(2490/2500-1)] – [1%*(daycount fraction=3/360)]}= (100,000,000) * {[-.004] – [ .0000833]}

LIBOR index

1M LIBOR

LIBOR rate

1%FIT

TRS on Bloomberg’s market leading indices are designed to assist traditional PMs in matching benchmark returns or to hedge
risk exposure using derivative trades. Bloomberg dealer pages, advanced analytics in pricing and in risk, and electronic tradingplatforms will help facilitate fl liquidity in this product.

Execution & Order Management

A Bloomberg Professional Services OfferingStandardized total return swaps on Bloomberg Barclays indices (BTRS)

Trade 1: PM enhances performance (investment) via BTRS continued

Cash flows
TR legResets at March 31st with payment date April 3rd.
Projected Index value = (1+ .01(31/360)) * 2500 = 2502.153
TR leg pays 100,000,000* (2502.153/2500-1) = $86,111.11

LIBOR leg

Libor leg pays for 31 days (ACT/360) *1% * 100,000,000 = 86,111.11

Notional resets(units = 40,000) * (end of March index reset 2502.153)= $100,086,111

Note the following:• No surprise that the net payment = 0, since we projected
the index growth rate to match that of LIBOR• Implied finance rate (or “finance spread”): To get a senseof intuition on this trade, note that the “quoted strike” (2490)
differs from the value of the index on the trade date (2501).
This difference (2501-2490=11), as expressed as percentage
of notional would be 0.44% (11/2500) or $440,000. Expressed

as a spread over/under Libor, this would equate toa NEGATIVE finance spread of approximately 147bps(or an equivalent implied finance rate of -0.47%).
• The notional growth at 1% per annum, would be offset by
the effect of discounting at 1month LIBOR (at 1% per annum).
In general this is not true.

Trade 2: PM is already “long” 100MM cash Bloomberg Barclays index portfolio, but hedges 25MM during the next 3 months

Deal details — Trade 2Position

Sell (TR Pay)

Notional

25,000,000Index

U.S. Corporate index (LUACTRUU index)

Units

10,000 = 25,000,000/2500

Trade dateMarch 3, 2017

Initial Index Value

2500

Index value on trade date (March 3rd)2501

Effective date

March 1, 2017

Valuation date

March 6, 2017

Maturity dateJune 1, 2017

Quoted Strike

2490

Initial payment$102,083.33 (i.e., Total Return payer, pays an initial payment of $102,083.33)
TR leg accrual – LIBOR leg accrual= (25,0000,000) *{ [(2490/2500-1)] – [1%* (daycount fraction=3/360)]}= (25,000,000) * {[-.004] – [ .0000833]}

LIBOR index

1M LIBOR

LIBOR rate

1%Similar, (but reverse direction) to example “Trade 1” above, the PM
would “Pay” TR on just $25MM notional of the BTRS, with a similar
NEGATIVE finance spread of approximately 147bps (or an equivalent
implied finance rate of -0.47%).

Standardized total return swaps on Bloomberg Barclays indices (BTRS)

Trade 3A: PM pre-allocates investment funds to become available in the future
PM locks up implied financing at an attractive level in anticipation of more funds becoming available next quarter.
Deal details — Trade 3A
PositionBuy (TR Receiver)

Notional

100,000,000Index

U.S. Corporate index (LUACTRUU index)

Units

40,000 = 100,000,000/2500

Trade date

March 3, 2017

Initial Index Value

2500

Index value on trade date (March 3rd)2501

Effective date

March 1, 2017

Valuation date

March 6, 2017

Maturity dateJune 1, 2017

Quoted Strike

2477

Initial payment-$928,333.33 (i.e., Total Return receiver receives initial payment of $928,333.33)
TR leg accrual – LIBOR leg accrual= (100,0000,000) *{ [(2477/2500-1)] – [1%*(daycount fraction=3/360)]}= (100,000,000) * {[-.0092] – [ .0000833]}

LIBOR index1M LIBOR

LIBOR rate

1%

Trade 3B: PM pre-allocates investment funds to become available in the future
PM locks up implied financing at an attractive level in anticipation of more funds becoming available next quarter.
Deal details — Trade 3B
Position

Sell (TR Pay)

Notional

100,000,000Index

U.S. Corporate index (LUACTRUU index)

Units

40,000 = 100,000,000/2500

Trade date

March 3, 2017

Initial Index Value

2500

Index value on trade date (March 3rd)2501

Effective date

March 1, 2017

Valuation date

March 6, 2017

Maturity dateJune 1, 2017

Quoted Strike2490

Initial payment-$408,333.33 (i.e., Total Return payer, pays an initial payment of $408,333.33)
TR leg accrual – LIBOR leg accrual= (100,0000,000) *{ [(2490/2500-1)] – [1%*(daycount fraction=3/360)]}= (100,000,000) * {[-.004] – [ .0000833]}

LIBOR index

1M LIBOR

LIBOR rate

1%

PM “goes long” (Receives TR) on $100MM 6mo trade and goesshort (Pays TR) on a $100MM 3mo trade, and thus produces a net
trade of a 3month x 3month forward $100MM BTRS trade. Onceagain, the difference between the quoted strike and the index
value on the trade date, results in positive ((2501-2477)/2500)

and negative ((2501-2490)/2500) for a net of 0.52% on
100MM notional. Expressed as a spread over/under Liboron the net resulting 3month x 3month forward swap, would
equate to a NEGATIVE finance spread of approximately
173.33 bps (or an equivalent implied finance rate of -0.73%).

Take the next step.

Beijing+86 10 6649 7500

Hong Kong+852 2977 6000

New York+1 212 318 2000

Singapore+65 6212 1000

For additional information,press the <HELP> key twiceon the Bloomberg Terminal®.

Dubai+971 4 364 1000

London+44 20 7330 7500

San Francisco+1 415 912 2960

Sydney+61 2 9777 8600

Frankfurt+49 69 9204 1210

Mumbai+91 22 6120 3600

São Paulo+55 11 2395 9000

Tokyo+81 3 3201 8900

bloomberg.com/professional

The data included in these materials are for illustrative purposes only. ©2018 Bloomberg L.P. 138996 DIG 0318