Global Derivatives Plummet $6Trillion to Only $633Trillion

Credit default swaps (CDSs) are one instrument that has shown a marked decline. The BIS report showed the total notional outstanding for CDS contracts for H2 2012 dropped 6.91% to US$25.069 trillion, from US$26.93 trillion for H1 2012.

This means the cumulative reduction for CDSs’ outstanding notional since June 2011 is US$7 trillion – partly due to contract compression, whereby economically redundant derivatives trades are terminated without changing the net position of each position, the report states.

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“Overall notional CDS amounts continued to slip as a result of stricter bank risk limits, rising concerns over the US fiscal cliff and sovereign credit downgrades,” said Zohar Hod, global head of sales at US risk management and market data services firm SuperDerivatives.


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