Template:M tldr isda a swap as a loan

“End-user” swaps are implied margin loans from a dealer to a customer — customers use swaps to change their market exposure whereas dealers delta-hedge to flatten their overall position, leaving only customer credit exposure — this is economically the same as lending to the customer receiving a financing rate, and paying the return of a principal asset minus loan principal and interest — this is equally true of synthetic margin loans like equity swaps and regular derivatives like interest rate swaps — in the real world, floating and fixed rates do not exist independently of principal debt investments — derivatives are tools to hypothetically separate them, but they must eventually be anchored to real-world investments, and these must be somehow financed — on this view an interest rate swap is a synthetic fixed-interest margin loan made against a bond.