Global Derivatives Market Expands to $516 Trillion
November 23rd, 2007I thought, “This must be an Onion story.”
Nope.
Via: Bloomberg:
The market for derivatives grew at the fastest pace in at least nine years to $516 trillion in the first half of 2007, the Bank for International Settlements said.
Credit-default swaps, contracts designed to protect investors against default and used to speculate on credit quality, led the increase, expanding 49 percent to cover a notional $43 trillion of debt in the six months ended June 30, the BIS said in a report published late yesterday.
Derivatives of debt, currencies, commodities, stocks and interest rates rose 25 percent from the previous six months, the biggest jump since the Basel, Switzerland-based bank began compiling the data. Investors have been turning to credit derivatives as a way to speculate on a growing risk of defaults amid record U.S. mortgage foreclosures.
“The pace of increase in the credit segment outstripped the rises in other risk categories,” Christian Upper, a BIS analyst in Basel, wrote in the report. Credit-default swaps are “the dominant instrument,” accounting for 88 percent of credit derivatives, the BIS said.
The money at risk through credit-default swaps increased 145 percent from last year to $721 billion, the report said. The amount at stake in the entire derivatives market is $11.1 trillion, according to the BIS, which was formed in 1930 to monitor financial markets and regulate banks.
Research Credit: PD
Does this mean that people are betting on, and hoping to make money off of others losing theirs? Must be if it is a “way to speculate on a growing risk of defaults amid record U.S. mortgage foreclosures.”
An Onion story? Wish it were so. Next year there will be a daily tear off page on my Onion calendar that says something like “Man from Ohio bets his shirt on neighbor losing theirs.”
The Onion is droll hilarity.
These speculators can’t be humans, can they?