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The BIS released its semi-annual statistics on positions in the global OTC derivatives market for end-December 2008. The total notional amount of OTC derivatives contracts outstanding was $592 trillion at the end of December 2008, 13.4% lower than six months earlier. The decline is the first since collection of the data began in 1998.
Credit market turmoil and the multilateral netting of contracts led to a contraction of 26.9% in outstanding credit default swaps (CDS). The second half of 2008 also saw the first significant decline of OTC derivatives contracts outstanding in the interest rate market (8.6%) and in the foreign exchange market (21%).
Despite the drop in amounts outstanding, movements of financial market prices in the second half of 2008 lifted gross market values 66.5%, to $33.9 trillion. Gross market values measure the cost of replacing all existing contracts and are thus a better measure of market risk than notional amounts outstanding.
The statistical release cites the following trends in the second half of 2008:
Ø CDS volumes continued to contract
Ø Commodity derivatives markets declined by two thirds
Ø The market value of interest rate products almost doubled
Semiannual OTC derivatives statistics at end-December 2008