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When learning about derivatives, we learnt about risk-free hedges and portfolios. However, one of the concepts was about borrowing and lending at the risk free rate. Now, for lending it's as simple as buying government bonds. However, how does one borrow at the risk free rate? I doubt it's about selling your own bonds. I'm just trying to work out how to apply these economic theories in real life, so any help will be greatly appreciated.

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A private person will almost never have an access to borrowing at risk free rate. However, governments such as Germany or Switzerland can borrow at essentially for all practical purposes at risk free rate by issuing government bonds.

As a private person you might get access to risk free loan if you are rich enough to be able to negotiate the rate with bank and if your project is extremely safe (think of Jeff Bezos asking for small loan to build a private parking lot).

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    $\begingroup$ Banks can borrow at the overnight rate, this must be pretty close to risk free. Consumers can also borrow at 0% with some new car promotions. $\endgroup$ – lunar_props Nov 29 '19 at 1:48
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    $\begingroup$ @lunar_props The 0% promotions are tricky though, because you are borrowing on the condition of buying a product. I will happily sell you an apple for \$120 in \$10 monthly installments at 0% interest. $\endgroup$ – Giskard Nov 29 '19 at 5:38
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    $\begingroup$ @Giskard I agree with this. The 0% interest promotions are a bad example. $\endgroup$ – lunar_props Nov 29 '19 at 16:11
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@1muflon1 is definitely right. But for the sake of debate: when your friend pays $30 for your dinner of two (and then says you need to pay him back at some point) -- he is essentially loaning you $15 at 0% interest. You would owe him 15 now if you had the cash, but if you wait 2 weeks...you'll still owe him $15. I.e. zero interest.

Trivial example, maybe. BUT, what about if you manufacture widgets & your Chinese supplier extended you generous payment terms, like Net 60, 90, 120. That is a non-trivial amount of money that you are essentially "borrowing" at 0% interest.

Finally, what if you set up a yoga studio & made your members pay annually up-front? You just got paid for a December service, but it's only January! My point is: There are many, many different ways to get cheap financing other than a bank...

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