Price Risk Intermediation in the Over-the-Counter DerivativesMarkets: Interpretation of a Global Survey

[...]Derivatives contracts are especially efficient vehiclesfor unbundling the price risks embodied in assets andliabilities.2 The contracts allow users to trade away therisks they do not wish to be exposed to while retainingother risk exposures. For example, in a financing relationshipbetween a lender and borrower, an interest rate swapcan be used to strip out the interest rate risk from thecredit risk. Such an unbundling of risk can resolve differencesin the risk preferences of the lender and borrower bypassing the unwanted interest rate risk to others in thederivatives markets who are more willing to bear it.[...]