You are viewing an obsolete version of the DU website which is no longer supported by the Administrators. Visit The New DU.
Democratic Underground Latest Greatest Lobby Journals Search Options Help Login
Google

Reply #19: 600 Trillion Notional Value - Notional values and actual dollar values ... [View All]

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
This topic is archived.
Home » Discuss » General Discussion Donate to DU
slipslidingaway Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-22-11 09:43 PM
Response to Original message
19. 600 Trillion Notional Value - Notional values and actual dollar values ...
http://www.democraticunderground.com/discuss/duboard.ph...

From February 2000

"Update Time...In fact, quite timely, really. Surely with the volatility in the bond market these days, it's high time we checked in on those wacky money center banks and their highly flammable derivatives exposure. All sarcasm aside, the reason we continue to update you each quarter on these numbers is that derivatives are part of "what's different this time". In 1990, the total notional value of derivatives outstanding "off" the balance sheet of the commercial banking system in the U.S. was $6.2 trillion. As of 3Q 1999 (the latest numbers released), the value has skyrocketed to over $35 trillion. Needless to say, the number is quite significant. See what we mean?

....Let's get one thing straight, one must draw a clear distinction between notional values and actual dollar values. The whole premise of derivatives transactions is that a few real dollars can be spent to control a large amount of notional dollars. Hence the leverage..."


September 1993

"...In futures trading, the ``notional principal amount'' refers to the value of the underlying assets in a futures contract. For example, in a corn futures contract to take future delivery of 5,000 bushels three months hence, the notional principal amount of the contract would be the price of a bushel of corn times 5,000. If the price of corn were, for example, $2.00, the notional principal value of the corn futures contract would be $10,000. But the actual price of the contract, however, is the margin set by the exchange; the CBOT, for example, requires $270 be paid to purchase a futures contract that on May 15 had a notional value of $11,637.50..."

Another snip...

"...With what are now called derivatives, we move from investment, and purchases and sales of hard commodities, to speculating on the future price or yield performance of what were once investments, and relatively simple, economically necessary transactions. It would be like going to the horse races to bet, not on the race, but on the size of the pot. Who would care about what's involved with getting the runners to the starting gate?..."


2008 ...

$596 Trillion! How can the derivatives market be worth more than the world's total financial assets?

http://www.slate.com/id/2202263 /

"Iowa Sen. Tom Harkin issued a call on Tuesday for regulation of the "over the counter" derivatives market, which has an estimated size of about $596 trillion. By contrast, the value of the world's financial assetsincluding all stock, bonds, and bank depositswas pegged at $167 trillion last year by McKinsey. How can the derivatives market be larger than the entire world's financial wealth? ..."


http://www.bis.org/statistics/otcder/dt1920a.pdf

"Table 19: Amounts outstanding of over-the-counter (OTC) derivatives

By risk category and instrument In billions of US dollars ..."





Printer Friendly | Permalink |  | Top
 

Home » Discuss » General Discussion Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002 DCScripts.com
Software has been extensively modified by the DU administrators


Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC