The Institutional Risk Analyst: The Trees Grow to the Sky

The Institutional Risk Analyst
published by Lord, Whalen LLC
Copyright 2014 - All Rights Reserved. No Republication Without Permission.

Our Products: The Institutional Risk Analyst The SEC Filings Catalog XBRL Filings Parser

About Contact Us

The Trees Grow to the Sky
November 17, 2003

The latest data on global OTC derivatives markets from the Bank for International Settlements indicates that total contracts reached $170 trillion by mid-year 2003, up from $127.5 trillion a year before and $142 trillion six months ago. That represents a 43% annual rate of growth over the past six months and 33% over the past year. This figure, together with the $38 trillion in outstanding positions in exchange traded futures and options, brings the total size of global derivatives markets to $208 trillion. Our friend Randall Dodd, proprietor of the Derivatives Study Center in Washington, notes, by comparison, that the total gross domestic product of the U.S. is about $11 trillion. We worry that the derivatives market continues to expand at rates far higher than the growth of the underlying economy, suggesting that most trading in derivatives is more gaming than bona fide risk management. Dodd observes that even looking at the more significant net increase in credit derivatives to $1.75 trillion as of June 2003, the sum represents a 33% increase over the past year and a 34% annual rate of increase in exposure from six months ago.

The Institutional Risk Analyst is published by Lord, Whalen LLC (LW) and may not be reproduced, disseminated, or distributed, in part or in whole, by any means, outside of the recipient's organization without express written authorization from LW. It is a violation of federal copyright law to reproduce all or part of this publication or its contents by any means. This material does not constitute a solicitation for the purchase or sale of any securities or investments. The opinions expressed herein are based on publicly available information and are considered reliable. However, LW makes NO WARRANTIES OR REPRESENTATIONS OF ANY SORT with respect to this report. Any person using this material does so solely at their own risk and LW and/or its employees shall be under no liability whatsoever in any respect thereof.