FINANCIAL IMPLOSION: Global Derivatives Market at $1,200 Trillion Dollars … 20 Times the World Economy
by Washington’s Blog
May 20, 2012
Top Derivatives Expert Estimates Size of the Global Derivatives Market at $1,200 Trillion Dollars … 20 Times Larger than the Global Economy
How Large Is the Derivatives Market?
Everyone paying attention knows that the size of the derivatives market dwarfs the global economy. But how big is it really?
For years, there have been rumors that there is over a quadrillion – one thousand trillion – dollars in notional value of outstanding derivatives. But no one really knew.
Even though the Bank of International Settlements regularly publishes tables showing the amounts of different types of derivatives, some of the categories are ambiguous, and so it has been hard to get a good handle on what’s really out there.
For example, one blogger wrote last year:
Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion.
Smart guys like bond trader Jeffrey Gundlach said last year that we’ve got a quadrillion dollar derivative overhang, the government hasn’t done anything to fix the basic problems in our economy, and so we’ll have another crash.
But I’ve now found an estimate from a top derivatives expert who confirms the claim.
Specifically, Paul Wilmott – who has written numerous books on the subject – estimated the number last year at $1.2 quadrillion:
The… derivatives market … is 20 times the size of the world economy.
According to one of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University (and whose speaking voice sounds eerily like John Lennon’s), $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. To put that in perspective, the world’s annual gross domestic product is between $50 trillion and $60 trillion.
A Clear and Present Danger to the World Economy