Credit Derivatives Surge 55 Per Cent

BARCELONA, Spain–(BUSINESS WIRE)–March 17, 2005–At its Annual General Meeting today, the International Swaps and Derivatives Association (ISDA) announced the results of its Year-End 2004 Market Survey of privately negotiated derivatives. According to the Survey, the notional amount for credit derivatives grew by almost 55 per cent in the last six months of the year to $8.42 trillion from $5.44 trillion. This represents an annual growth rate of 123%. Credit derivatives, for the purposes of the Survey, comprise credit default swaps, baskets and portfolio transactions. In the first six months of 2004, credit derivatives growth was 44 per cent.

“The strong growth exhibited in credit derivatives clearly underscores the benefits of these products as risk management tools for an increasing range of market participants,” said Bob Pickel, Chief Executive Officer and Executive Director of ISDA. “It also underscores the importance of ISDA’s, and the industry’s, efforts to build a strong operational infrastructure that supports continuing growth and innovation in the marketplace.”
The notional principal outstanding volume of interest rate derivatives, which include interest rate swaps and options and cross-currency swaps, grew by 12 per cent to $183.6 trillion from $164.49 trillion, but is a slower rate of growth than in the first half of 2004, when the same product set grew by 16 per cent. The annual growth rate for interest rate derivatives to end 2004 is 29 per cent.
Notional outstanding volume for equity derivatives, which consist of equity swaps, options, and forwards, grew by almost 10 per cent from $3.79 trillion to $4.15 trillion, as compared with 9.7 per cent in the first half of 2004. This represents year-on-year growth of 21 per cent.
The survey records notional outstanding volumes for all products covered, i.e. notional amounts of business transacted in relation to the underlying asset, versus the net exposures participants have to one another after conducting offsetting transactions and other credit risk mitigation techniques, such as netting. ISDA surveys its Primary Membership twice yearly on a confidential basis. In this survey, 109 firms provided data on interest rate swaps; 91 provided responses on credit derivatives; and 87 provided responses on equity derivatives. Although participation in the Survey is voluntary, all major dealers provided responses. All notional principal outstanding amounts have been adjusted for double counting of inter-dealer transactions. 109 firms responded to the Survey. For further detail on the ISDA Market Survey methodology, please see
About ISDA
ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 625 member institutions from 47 countries on six continents. These members include most of the world’s major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association’s web site:

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