Equity Swaps - What's the "return" on the equity leg?

CFA Level III Derivatives
#1

Does “return” include capital de/appreciation or is it only dividends?

In addition, if, as in the Schweser notes, the notional principal is the portfolio value, is the notional a changing amount updated by the value of the equity portfolil or a fixed amount at the inception of the swap?

#2

It depends on the swap.

Some are capital appreciation only. Others are total return.

The notional value doesn’t change. You calculate the equity return and apply it to the notional.

#3

Thanks!