Academic

OTC Derivatives Before The Fall

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

The Bank for International Settlements released its report on the size of the over the counter derivatives market in the first half of 2008, and my goodness:

The notional amounts outstanding of over-the-counter (OTC) derivatives continued to expand in the first half of 2008. Notional amounts of all types of OTC contracts stood at $683.7 trillion at the end of June, 15% higher than six months before. Multilateral terminations of outstanding contracts resulted in the first ever decline of 1% in the volume of outstanding credit default swaps (CDS) since the first publication of CDS statistics in December 2004. The average growth rate for outstanding CDS contracts over the last three years has been 45%. In contrast to CDS markets, markets for interest rate derivatives and FX derivatives both recorded significant growth. Open positions in interest rate derivatives contracts rose by 17%, while those in FX contracts expanded by 12%. Gross market values, which measure the cost of replacing all existing contracts and are thus a better gauge of market risk than notional amounts, increased by 29% to $20.4 trillion at the end of June 2008.

Full post as published by Conglomerate on November 12, 2008 (boomark / email).