I think it'd be very hard to find the source of the above figure published.
" Low end estimate $630 Trillion. High end estimate 1,200 Trillion. (For all derivatives, without mentioning what year.)"
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Options are the Biggest market: There is $1.2 quadrillion invested in derivatives alone.
- Thread starter lawrence-lugar
- Start date
I think it'd be very hard to find the source of the above figure published.
" Low end estimate $630 Trillion. High end estimate 1,200 Trillion. (For all derivatives, without mentioning what year.)"
It seems for USA alone, about $32 Trillion for options these years.
$200 to $230 trillion for all derivatives.
No idea roughly about the global figure - such as it would be how many times of the US total.
Q Quarterly Report on Bank Derivatives Activities
http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq315.pdf (on Page 14)
http://www.occ.gov/topics/capital-m...derivatives/derivatives-quarterly-report.html
In $ Billions
2014 Q4
2015 Q3
Futures & Forwards
43,368
38,988
Total Options
32,403
32,317
Total Swaps
135,170 (61%)
112,698 (59%)
Credit Derivatives
9,449
8,198
Total Derivatives Notionals
220,390 (100%)
192,201 (100%)
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$200 to $230 trillion for all derivatives.
No idea roughly about the global figure - such as it would be how many times of the US total.
Q Quarterly Report on Bank Derivatives Activities
http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq315.pdf (on Page 14)
http://www.occ.gov/topics/capital-m...derivatives/derivatives-quarterly-report.html
In $ Billions
2014 Q4
2015 Q3
Futures & Forwards
43,368
38,988
Total Options
32,403
32,317
Total Swaps
135,170 (61%)
112,698 (59%)
Credit Derivatives
9,449
8,198
Total Derivatives Notionals
220,390 (100%)
192,201 (100%)
UQ
Last edited:
Q
http://www.bis.org/statistics/about_derivatives_stats.htm
Derivatives statistics
The BIS compiles and publishes one set of statistics on exchange-traded derivatives and two sets on over-the-counter derivatives markets.
Exchange-traded derivatives
The exchange-traded derivatives statistics complete the coverage of the derivatives markets by providing information about the size and structure of organised futures and options markets. The statistics are compiled by the BIS from commercial data sources, and capture the turnover and open interest of interest rate and foreign exchange derivatives traded on derivatives exchanges.
Semiannual OTC derivatives statistics
The semiannual survey is conducted under the auspices of the Committee on the Global Financial System and provides information about the size and structure of the largest OTC derivatives markets. It captures notional amounts outstanding, gross market values, gross credit exposures and Herfindahl concentration measures. Central banks and other authorities from the following 13 jurisdictions currently participate in the survey: Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.
Triennial OTC derivatives statistics
The Triennial Central Bank Survey enhances the semiannual survey by collecting data from a much broader sample of derivatives dealers - as many as 53 jurisdictions participate in the survey. Like the semiannual survey, the Triennial Survey captures notional amounts outstanding and gross market values. In addition, it captures turnover in OTC interest rate and foreign exchange derivatives markets.
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Q
Exchange-traded derivatives statistics
Updated 6 December 2015
Global tables
D1 Exchange-traded futures and options by location of exchange
http://www.bis.org/statistics/d1.pdf
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Q Semiannual OTC derivatives statistics
Updated 6 December 2015
Global OTC derivatives market
In billions of US dollars
All contracts
- Notional amounts outstanding
H2 2013 H1 2014 H2 2014 H1 2015
710,633 691,640 629,142 552,909
- Gross market value
H2 2013 H1 2014 H2 2014 H1 2015
18,825 17,438 20,878 15,521
Part A. Foreign exchange, interest rate, equity linked contracts
http://www.bis.org/statistics/d5_1.pdf
Part B. Commodity contracts, credit default swaps
http://www.bis.org/statistics/d5_2.pdf
UQ
http://www.bis.org/statistics/about_derivatives_stats.htm
Derivatives statistics
The BIS compiles and publishes one set of statistics on exchange-traded derivatives and two sets on over-the-counter derivatives markets.
Exchange-traded derivatives
The exchange-traded derivatives statistics complete the coverage of the derivatives markets by providing information about the size and structure of organised futures and options markets. The statistics are compiled by the BIS from commercial data sources, and capture the turnover and open interest of interest rate and foreign exchange derivatives traded on derivatives exchanges.
Semiannual OTC derivatives statistics
The semiannual survey is conducted under the auspices of the Committee on the Global Financial System and provides information about the size and structure of the largest OTC derivatives markets. It captures notional amounts outstanding, gross market values, gross credit exposures and Herfindahl concentration measures. Central banks and other authorities from the following 13 jurisdictions currently participate in the survey: Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.
Triennial OTC derivatives statistics
The Triennial Central Bank Survey enhances the semiannual survey by collecting data from a much broader sample of derivatives dealers - as many as 53 jurisdictions participate in the survey. Like the semiannual survey, the Triennial Survey captures notional amounts outstanding and gross market values. In addition, it captures turnover in OTC interest rate and foreign exchange derivatives markets.
UQ
Q
Exchange-traded derivatives statistics
Updated 6 December 2015
Global tables
D1 Exchange-traded futures and options by location of exchange
http://www.bis.org/statistics/d1.pdf
UQ
Q Semiannual OTC derivatives statistics
Updated 6 December 2015
Global OTC derivatives market
In billions of US dollars
All contracts
- Notional amounts outstanding
H2 2013 H1 2014 H2 2014 H1 2015
710,633 691,640 629,142 552,909
- Gross market value
H2 2013 H1 2014 H2 2014 H1 2015
18,825 17,438 20,878 15,521
Part A. Foreign exchange, interest rate, equity linked contracts
http://www.bis.org/statistics/d5_1.pdf
Part B. Commodity contracts, credit default swaps
http://www.bis.org/statistics/d5_2.pdf
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Last edited:
For OTC contracts (total 553), roughly 70% are swaps (37+24+320+1+15=400); about 8% are options (13+40+0.5=44).
Q Semiannual OTC derivatives statistics
Updated 6 December 2015
Global OTC derivatives market
In billions of US dollars
All contracts
- Notional amounts outstanding
H1 2015
552,909
UQ
OddTrader, I think you are failing to understand the math behind swaps. Swaps are just a exchange of interest payments that are benchmarked against a notional amount. The notional amount is not really that relevant. It more or less just gives the size of the overall economy. Quoting the notional amount is not the same as quoting the notional amount say of an FX trader on ET who is using 50 to 1 leverage where they have 1k up in margin but could lose 50k. Swaps are not marginable in that context. As the economy grows, so will the size of the swap market.
People trading with interest rates background would think swaps is not risky. But the report says the opposite.
My view is normally the markets should be OK, when behaving normal. But black swan will appear and there is a systemic risk that no any single market could avoid.
The source of the systemic risk could be interest rates itself one day. That nobody would believe today!
Otherwise, we don't call it black swan!
Q June 2014
http://researchbriefings.files.parliament.uk/documents/SN06306/SN06306.pdf
Summary
This note summarises the issue of ‘mis-sold’ business loans. The loans in question were attached to interest rate guarantees which, following the dramatic falls in interest rates since the financial crisis, have left borrowers paying much more for their loans than they would otherwise have done.
...
1. Introduction
A growing number of individual complaints and media interest in interest rate swaps suggests that a new ‘financial scandal’ may be brewing. A combination of possibly poorly understood and complicated financial contracts, combined with an extraordinary economic backdrop, has left some small businesses in particular with what they see as crippling interest rates at a time when the rest of the economy is enjoying record low interest rates.
...
Can customers terminate their interest rate swaps early? It is possible for a customer to terminate their swap early; however, and as with fixed rate commercial mortgages, doing so incurs the cost of the difference between the interest rate on the contract and what interest rates are predicted to be for the remaining life of the transaction. This is known as the break cost . It is also important to note that it may also be possible to terminate a product in part or to restructure it to account for any change in a client’s circumstances.2 In the Radio 4 programme cited above, the banks and industry specialists say that: all the features of the swap contract were made clear to their customers; the customers understood what they were doing and subsequent claims that they did not are typical in cases where someone has made a wrong judgement and lost out as a result; customers were advised to seek independent advice before agreeing to a contract; customers were not forced to take out a contract; and customers were not advised to take out a contract
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My view is normally the markets should be OK, when behaving normal. But black swan will appear and there is a systemic risk that no any single market could avoid.
The source of the systemic risk could be interest rates itself one day. That nobody would believe today!
Otherwise, we don't call it black swan!
Q June 2014
http://researchbriefings.files.parliament.uk/documents/SN06306/SN06306.pdf
Summary
This note summarises the issue of ‘mis-sold’ business loans. The loans in question were attached to interest rate guarantees which, following the dramatic falls in interest rates since the financial crisis, have left borrowers paying much more for their loans than they would otherwise have done.
...
1. Introduction
A growing number of individual complaints and media interest in interest rate swaps suggests that a new ‘financial scandal’ may be brewing. A combination of possibly poorly understood and complicated financial contracts, combined with an extraordinary economic backdrop, has left some small businesses in particular with what they see as crippling interest rates at a time when the rest of the economy is enjoying record low interest rates.
...
Can customers terminate their interest rate swaps early? It is possible for a customer to terminate their swap early; however, and as with fixed rate commercial mortgages, doing so incurs the cost of the difference between the interest rate on the contract and what interest rates are predicted to be for the remaining life of the transaction. This is known as the break cost . It is also important to note that it may also be possible to terminate a product in part or to restructure it to account for any change in a client’s circumstances.2 In the Radio 4 programme cited above, the banks and industry specialists say that: all the features of the swap contract were made clear to their customers; the customers understood what they were doing and subsequent claims that they did not are typical in cases where someone has made a wrong judgement and lost out as a result; customers were advised to seek independent advice before agreeing to a contract; customers were not forced to take out a contract; and customers were not advised to take out a contract
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Q The Root Cause Of The 2008 Financial Meltdown: Derivatives
Submitted by IWB, on January 15th, 2011
http://investmentwatchblog.com/the-root-cause-of-the-2008-financial-meltdown-derivatives/
During the financial crisis in 2008, the root cause of the meltdown was derivatives. Specifically, CDOs, or Collateralized Debt Obligations related to mortgages and CDSs, or Credit Default Swaps. Derivatives encompass a wide range of financial products: futures contracts, interest rate swaps, options contracts, foreign exchange contracts (currencies), etc.
...
... ...
The question is not will it happen again “ the question is WHEN it will happen?
I am 99% confident it WILL happen again – I am 99% confident that the scale of the collapse will be MUCH LARGER than the most recent collapse in 2008 “ and I am 99% confident we will be in FAR WORSE SHAPE to deal with the collapse in light of the massive amounts of debt that countries have accumulated during this most recent collapse.
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Q
Wall Street Confidence Trick: The Interest-Rate Swaps That Are Bankrupting Local Governments
Wednesday, 21 March 2012 00:00
http://www.truth-out.org/news/item/...-swaps-that-are-bankrupting-local-governments
Far from reducing risk, derivatives increase risk, often with catastrophic results. -Derivatives expert Satyajit Das, Extreme Money (2011).
--- (long article)
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Wall Street Confidence Trick: The Interest-Rate Swaps That Are Bankrupting Local Governments
Wednesday, 21 March 2012 00:00
http://www.truth-out.org/news/item/...-swaps-that-are-bankrupting-local-governments
Far from reducing risk, derivatives increase risk, often with catastrophic results. -Derivatives expert Satyajit Das, Extreme Money (2011).
--- (long article)
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Q
Cities Paying Millions to Get Out of Bad Bank Deals
http://www.governing.com/topics/finance/gov-chicago-paying-millions-bad-swap-deals.html
Chicago is the latest example of the many local and state governments that are haunted by interest rate swap agreements they made before the Great Recession.
by Liz Farmer | March 6, 2015
When the Great Recession delivered the biggest blow to government budgets this side of World War II, it wasn’t just slashing revenue streams -- it also made certain financing agreements more costly in the long run.
The agreements are called interest rate swaps, a holdover from the years leading up to 2008 when the booming market made even risky investments seem like a good idea. But in reality, these financing agreements with banks have come back to haunt governments following the financial markets crash and severe drop in interest rates. Last week, Chicago became the latest example when a credit rating downgrade by Moody’s Investors Service triggered a potential $58 million penalty for the fiscally beleaguered city.
Penalties related to ratings downgrades are common in swaps, says Municipal Market Analytics Partner Matt Fabian. But typically, the ratings floor is well below the government’s rating at the time of the deal.
...
...
...
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Cities Paying Millions to Get Out of Bad Bank Deals
http://www.governing.com/topics/finance/gov-chicago-paying-millions-bad-swap-deals.html
Chicago is the latest example of the many local and state governments that are haunted by interest rate swap agreements they made before the Great Recession.
by Liz Farmer | March 6, 2015
When the Great Recession delivered the biggest blow to government budgets this side of World War II, it wasn’t just slashing revenue streams -- it also made certain financing agreements more costly in the long run.
The agreements are called interest rate swaps, a holdover from the years leading up to 2008 when the booming market made even risky investments seem like a good idea. But in reality, these financing agreements with banks have come back to haunt governments following the financial markets crash and severe drop in interest rates. Last week, Chicago became the latest example when a credit rating downgrade by Moody’s Investors Service triggered a potential $58 million penalty for the fiscally beleaguered city.
Penalties related to ratings downgrades are common in swaps, says Municipal Market Analytics Partner Matt Fabian. But typically, the ratings floor is well below the government’s rating at the time of the deal.
...
...
...
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Q
2010
AIRLINE BANKRUPTCY: THE DETERMINING FACTORS
LEADING TO AN AIRLINE’S DECLINE
http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=1088&context=cmc_theses
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2010
AIRLINE BANKRUPTCY: THE DETERMINING FACTORS
LEADING TO AN AIRLINE’S DECLINE
http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=1088&context=cmc_theses
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Q 2010
DERIVATIVES AND BANKRUPTCY : THE FLAWED CASE FOR SPECIAL TREATMENT
https://www.law.upenn.edu/journals/jbl/articles/volume12/issue1/Lubben12U.Pa.J.Bus.L.61(2009).pdf
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DERIVATIVES AND BANKRUPTCY : THE FLAWED CASE FOR SPECIAL TREATMENT
https://www.law.upenn.edu/journals/jbl/articles/volume12/issue1/Lubben12U.Pa.J.Bus.L.61(2009).pdf
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