The Derivatives Market Growth was about 30% in the first half of 2007 when it reached a size of $US 370 trillion. This growth was mainly due to the increase in the participation of the bankers, investors and different companies. The derivative market instruments are used by them to hedge risks as well as to satisfy their speculative needs.
The derivative market growth for different derivative market instruments may be discussed under the following heads.
• Derivative Market Growth for the Exchange-traded-Derivatives
The Derivative Market Growth for equity reached $114.1 trillion. The open interest in the futures and options market grew by 38 % while the interest rate futures grew by 42%. Hence the derivative market size for the futures and the options market was $49 trillion.
• Derivative Market Growth for the Global Over-the-Counter Derivatives
The contracts traded through Over-the-Counter market witnessed a 24 % increase in its face value and the over-the -counter derivative market size reached $70,000 billion. This shows that the face value of the derivative contracts has multiplied 30 times the size of the US economy. Notable increases were recorded for foreign exchange, interest rate, equity and commodity based derivative following an increase in the size of the Over-the Counter derivative market.
The Derivative Market Growth does not necessitate an increase in the risk taken by the different investors. Even then, the overshoot in the face value of the derivative contracts shows that these derivative instruments played a pivotal role in the financial market of today.
• Derivative Market Growth For The Credit Derivatives
The credit derivatives grew from $4.5 trillion to $0.7 trillion in 2001. This derivative market growth is attributed to the increase in the trading in the synthetic collateral Debt obligations and also to the electronic trading systems that have come into existence.
The Bank of International Settlements measures the size and the growth of the derivative market. According to BIS, the derivative market growth in the over the counter derivative market witnessed a slump in the second half of 2006. Although the credit derivative market grew at a rapid pace, such growth was made offset by a slump somewhere else. The notional amount of the Credit Default Swap witnessed a growth of 42%. Credit derivatives grew by 54%. The single name contracts grew by 36%. The interest derivatives grew by 11%. The OTC foreign exchange derivatives slowed by 5%, the OTC equity derivatives slowed by 10%. Commodity derivatives also experienced crawling growth pattern.
For more details on the derivatives market growth the websites to be viewed are uk.biz.yahoo.com, nasdaq.com, papers.ssrn.com.