Friday, October 10, 2008

How big is the Credit Default Swaps market?

Credit derivatives have grown rapidly over the past several years as dealers increasingly used them to structure securities to help meet investor demand for higher yields. From 2003 to 2007, credit derivative contracts grew at a 100% compounded annual growth rate. Given current credit market turmoil, credit derivative growth has eased. In the first quarter, credit derivatives grew only 4%, or $581 million, to $16.4 trillion.  Credit default swaps represent the dominant product at 99% of all credit derivatives notionals.  Notionals are the nominal or face amount that is used to calculate payments made on swaps and other risk management products. This amount generally does not change hands and is thus referred to as notional.  As is often the case with a new and rapidly growing market, operational issues became a supervisory concern in the credit derivatives market in recent years.   

1 comment:

Hugh said...

part of the "problem" in the market right now is that money has been flowing out of CDSs. So it's down (maybe) to $16 trillion, but in 2007 it was much higher. see this pdf:
http://www.isda.org/statistics/pdf/ISDA-Market-Survey-historical-data.pdf