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 overall market exposure whereas dealers hedge to zero-out their overall position — customers have only market exposure; dealers have only customer credit exposure — this is economically the same as customers borrowing to buy an asset, paying a financing rate, and receiving the return of that asset less loan principal and interest — 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 financed — even an interest rate swap is a synthetic fixed-interest margin loan made against a bond.