Derivatives notional amounts vastly exceed their underlying market values

Evidence

The figure of 273 trillion is the sum of the total notional amounts of exchangetraded and over-the-counter derivatives contracts at the end of June 2004, as calculated by the Bank for International Settlements (2004, p. 10, table A2). The Bank's estimate of the gross market value corresponding to the 220 trillion over-the-counter portion of this total is $6.4 trillion: the gross market value is the sum “of the absolute values of all open contracts with either positive or negative replacement values evaluated at market prices prevailing at the reporting date” (Bank for International Settlements 2003, p. — Donald MacKenzie, An Engine, Not a Camera, 1380

Categorization

• DEFINE: Clarifies the precise meaning of ‘gross market value’ of derivatives contracts.
• CANDY: A 273 trillion notional derivatives market whose gross value is just 6.4 trillion is a striking, self-contained conversation fact.
• XREF: connects to: Financial crisis instruments circulated far above the value of their underlying assets — Max Haiven, Cultures of Financialization, 64; Nominal derivatives totals overstate their significance by roughly a hundredfold — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 32; Notional swap values massively overstate their economic importance. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1603 (+1 more)