This paper discusses the pricing of total

return swap which is one of the credit derivatives. As the total

return swap contracts are exposed to both interest rate risk and

default risk, this paper characterizes the interest rate risk

through HJM model. Intensity model and hybrid model are used to

characterize the default risk and to derive the corresponding

pricing formula for two cases when the default time and interest

rate are independent or correlated, respectively. Monte Carlo

simulation method is used here to derive the numerical solution of

the pricing problem.