Derivative Market Size

The Derivative Market Size reached almost $US370 trillion in the first half of 2007. This huge size may be attributed to the upsurge in the participation of bankers, investors and different companies. They used the derivative market instruments as a tool to hedge their risks. Participation also rose due to speculative purposes.

•  Market Size of the Global Over-the-Counter Derivatives

There was a 24 % rise in the face value of all the derivative contracts that were traded through the Over – the-Counter market and reached a derivative market size of $70,000 billion. This simply reflects the fact that the face value of the derivative contracts has multiplied 30 times the size of the US economy. Since the inception of the decade the derivative market size has almost quadrupled. With the increase in the size of the Over-the Counter derivative market , notable increases were recorded for foreign exchange, interest rate, equity and commodity based derivative.

The increase in the derivative market size does not imply the increase in the risk taking of the investors. Even then, the overshoot in the face value of the derivative contracts shows the pivotal role that these derivative instruments play in the financial market of today.

•  Market Size For the Exchange Traded Derivatives

The equity derivative market size is about $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.

•  Credit Derivatives

The credit derivative market size hiked to $4.5 trillion to $0.7 trillion in 2001. The increase in the market size for the credit derivatives is also due to the increase in the trading in the synthetic collateral Debt obligations and also due to the electronic trading systems that have come to exist.

Tracing back to the history of the derivative market, we have seen that the derivative market size played a vital role in the regime of commerce and finance over a period of thousand years. In 1750 B.C in Mesopotamia, the derivative contracts were written on clay tablets. Futures trading has taken place in the Japanese market where rice had been used as the warehouse receipts. Forward trading took place in the US through the Chicago Board of trade since 1849. The derivative market size is estimated by the Bank of International Settlements.

For more details about the derivative market size, the relevant websites are financialpolicy.org, theaustralian.news.com, portfolio.com etc.