View Full Version : Global Derivatives Exposure $190,000 Per Capita

March 18th 09, 12:03 AM
Derivatives exposures is worth $190K/human being on Earth

The global derivatives market exposure is worth $1.144

That's $190,000 for every human being on Earth. Something tells
me that most of those derivatives ain't worth the hard-drive
sectors they're stored on.

Whilst outstanding derivatives are notional amounts until they
are crystallised, actual exposure is measured by the net credit
equivalent. This is normally a lower figure unless many variables
plot a locus in the wrong direction simultaneously. This could be
because of catastrophic unpredictable events, ie, "Black Swans",
such as cascades of bankruptcies and nationalisations, when the
net exposure can balloon and become considerably larger or indeed
because some extremely dislocating geo- political or geo-physical
events take place simultaneously. Also, the notional value
becomes real value when either counterparty to the OTC derivative
goes bankrupt. This means that no large OTC derivative house can
be allowed to go broke without falling into the arms of another.
Whatever funds within reason are required to rescue failing
international investment banks, deposit banks and financial
entities ought to be provided on a case by case basis. This is
the asymmetric nature of derivatives and here lies the potential
for systemic risk to the global economic system and financial
markets if nothing is done.