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A total return swap can be used to replicate a long or a short position in an asset or portfolio of assets Suppose an investor bought $1 million of a particular hedge fund and simultaneously borrowed $1 million secured by the hedge fund assets In practice, a hedge fund is not a marginable asset, so any dealer or bank that falls under the US Federal Reserve System s Regulation T could not count the value of the hedge fund as collateral Also, the lender would likely lend only a percentage of the total value of the assets However, for the purposes of the example, assume that the investor can, in fact, borrow the entire purchase price of the hedge fund investment Suppose that each quarter, the investor withdraws the gains from the hedge fund investment and makes up any loss.

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Figure 15-16

The investor would also pay interest to the lender on the same day While the investor would have to make the entire interest payment to the lender, the cash ows would net at the investor s bank, as long as the hedge fund pays out the returns on the same schedule as the interest payments The cash ows for this leveraged transaction appear in Figure 131 In Figure 131, the $1 million investment is displayed as a downward arrow representing a cash out ow (truncated in scale) The investor borrows an equal amount, but the time line shows both cash ows, which net to zero Then, each quarter, the investor receives a payout equal to the hedge fund return and makes an interest payment on the borrowed money For convenience, the hedge fund returns in Figure 131 are all positive, but a hedge fund can have losses.

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Of all the Office applications, Microsoft Word gives you the best support for PDF file creation. Microsoft Word is the only word-processing application that provides access to the structural data of the document. The structural data of the Word document such as titles, heads, tables, paragraphs, figure captions, and so on can be converted to tagged Bookmarks. Tagged Bookmarks give you much more control over the PDF content. You can navigate to the element structures, and move, copy, extract, and delete pages through menu commands in the Bookmarks tab. With Word, and all Microsoft Office programs you have several choices for PDF Conversion. You can use the Create PDF From File command, use the Combine Files command, drag and drop Microsoft Office files on the Acrobat Document pane, print to PostScript and convert the PostScript in Acrobat Distiller, and use a tool developed by Adobe called the Acrobat PDFMaker. This tool is installed in all Office programs and several other Microsoft programs.

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For example, a loss attribute might be expressed as no more than 01% of packets will be dropped when measured over any time period larger than T , a delay attribute might be expressed as 50% of delivered packets will see less than a delay of d milliseconds, 30% will see a delay less than 2d ms, 20% will see a delay of less than 3d ms The PDB draft suggests that PDBs should not be used as such but as parts of service speci cations This is well in line in using them as part of SLSs A Best Effort PDB is provided in [RFC3086] by way of an example.

This leveraged transaction would require the hedge fund investor to pay the counterparty the interest payment and make up the loss on the fund Figure 132 shows the net cash ows in each quarter from Figure 131 The total return swap acknowledges the $1 million investment as a notional amount but the investor makes no cash payment at the onset The swap counterparty pays the investor the cash amount equal to the return on the hedge fund on a $1 million notional amount, reduced by the interest.

In this way, the entries of the resulting regressor G will be uncorrelated to a reasonable i extent, and their variances could be estimated recursively as follows:

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