Global Credit Derivatives Market = x10 Global GDP.

[The once and future king]

Global Derivatives Market = x10 Global GDP.

Every now and again you stumble on a piece of information that blows your mind. There is about 450 Trillion dollars in traded risk (derived from credit)which is greater than the global housing market and if you sold every company on the planet it wouldnt raise that much capital.

Warren Buffet once described derivatives as 'Weapons of Mass Financial Destruction'. And he is right. They do not disperse risk. They magnify it.

Sorry, if this is a bit sparse, I am still digesting this my self but felt compelled to put it out there.

[Zygote]

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if you sold every company on the planet it wouldnt raise that much capital.

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to who?

[GoodCallYouWin]

"to who?"

The intergalatic monetary fund.

[The once and future king]

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if you sold every company on the planet it wouldnt raise that much capital.

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to who?

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A forum nit?

You realize that this is the mechanism by which the vast majority of "paper" money enters the economy. This is a market of debt.

[bobman0330]

I think you're probably confusing the notional value of existing derivatives with the actual risk involved. With an option or an interest-rate swap or pretty much any other kind of common derivative, the notional value is going to be much bigger than the economic value or the actual payments involved.

Also, a lot of derivatives only transfer existing risk from one person to another, they don't actually create it. Not sure how much of the market that represents these days though.

[Zygote]

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if you sold every company on the planet it wouldnt raise that much capital.

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to who?

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A forum nit?

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your global gdp stat is bunk and void of logic or relevance to our world. Whether you want consider that relevant or not is your choice.

[The once and future king]

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your global gdp stat is bunk and void of logic or relevance to our world. Whether you want consider that relevant or not is your choice.

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Im only using it to illustrate a point you nit. Trying to put the sum of 450 trillion dollars into perspective.

[mosdef]

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your global gdp stat is bunk and void of logic or relevance to our world. Whether you want consider that relevant or not is your choice.

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Im only using it to illustrate a point you nit. Trying to put the sum of 450 trillion dollars into perspective.

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Yes, but I think there's a lot of "double counting" in the derivatives market. For one thing, if two people participate in, say, an interest rate swap then they are both at risk of interest rates moving in an unfavourable direction, but there is no risk that they both get dinged with bad interest rate movements. Also, if someone sells an interest rate swap and then later decides to hedge by taking the opposite position, that person could conceivabley be on both ends of a cancelling transaction where -1+1=0, but -1+1=2 in "magnitude of derivatives market".

[The once and future king]

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your global gdp stat is bunk and void of logic or relevance to our world. Whether you want consider that relevant or not is your choice.

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Im only using it to illustrate a point you nit. Trying to put the sum of 450 trillion dollars into perspective.

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Yes, but I think there's a lot of "double counting" in the derivatives market. For one thing, if two people participate in, say, an interest rate swap then they are both at risk of interest rates moving in an unfavourable direction, but there is no risk that they both get dinged with bad interest rate movements. Also, if someone sells an interest rate swap and then later decides to hedge by taking the opposite position, that person could conceivabley be on both ends of a cancelling transaction where -1+1=0, but -1+1=2 in "magnitude of derivatives market".

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Well yes, however I think Zygote was just upset at me using GDP as ACists dont like it. (I think this is why he went off totaly nittastic im not sure.)

The derivative onion is hard to peel back and actual accounting is virtually impossible. Never the less the figure I gave is still very very telling even if it slightly sensationalist.

[Copernicus]

Telling of what? And derivatives used properly most certainly do disperse risk