Which of the following is an example of a total return swap?

A total return swap is a financial contract between two parties that exchanges the total return of an asset, which includes both income (like interest or dividends) and capital appreciation, for a fixed or floating interest payment. In this context, the correct choice describes a scenario where one party makes a payment based on interest while receiving the profits generated by a security, effectively capturing both income and appreciation, which is the essence of a total return swap.

The first option describes a typical interest rate swap, which involves exchanging fixed and floating interest rate payments but does not capture the entire return of an asset. The third choice involves an exchange of equity for commodities, which does not fall under the total return swap framework as it describes a swap between different asset classes rather than the returns on a single asset. Finally, a contract for differences focuses on the price differences between the opening and closing prices of a stock, which does not encapsulate the full total return of the underlying asset, thus distinguishing it from total return swaps.