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> The size of the global derivatives market is 1.5 quadrillion dollars No. No it is not. No 1,000,000,000 times. NOTIONAL DOES NOT EQUAL MARKET VALUE. It's al
by retube 11y ago
> The size of the global derivatives market is 1.5 quadrillion dollars
No. No it is not. No 1,000,000,000 times. NOTIONAL DOES NOT EQUAL MARKET VALUE.
It's also completely meaningless as most trades offset. Trades are rarely torn up, you just do a new one to offset your risk. E.g GS vs JPM: they probably have 100bn of notional with each other. Actual risk? very little as the vast majority of trades just offset.
Current outstanding derivative notional is more like a measure of all notional that's historically traded.
Anyhow that aside, notional is STILL a meaningless number. It tells you nothing about the risk or market value of the trade.
- vasilipupkin 11y agoYeah. It's a little bit amusing when people equate "I don't understand anything whatsoever about finance and have no desire to understand it" with "it is extremely complex". There is nothing complex about notional value of a derivative vs its market value. 2008 happened not because finance is complex, but because financial bets always incur a degree of risk and that risk sometimes materializes. Anyone who ever extended a loan to anyone else takes a risk that the loan will not be paid back. Sometimes, it isn't paid back
- deleted 11y ago[deleted]