The derivatives market is one of the largest financial markets in the world. It is estimated that the total notional value of derivatives contracts outstanding globally is in excess of $500 trillion, which is several times larger than the size of the global economy. However, it is important to note that the notional value of a derivative contract is not the same as its market value or its potential risk exposure.
The size of the derivatives market has grown rapidly in recent decades, driven by the increasing demand for risk management and investment opportunities. The growth of the market has been particularly pronounced in the interest rate and credit derivatives markets, which account for the majority of trading activity.
The Bank for International Settlements (BIS) regularly publishes statistics on the size and composition of the global derivatives market. According to the latest BIS statistics, the notional amount outstanding of over-the-counter (OTC) derivatives contracts was $558 trillion at the end of 2020. Interest rate derivatives accounted for the largest share of the market, with a notional amount outstanding of $364 trillion, followed by foreign exchange derivatives at $105 trillion, credit derivatives at $11 trillion, and equity derivatives at $9 trillion.
It is important to note that the size of the derivatives market is subject to fluctuations over time, depending on market conditions and regulatory changes. The global financial crisis of 2008 had a significant impact on the derivatives market, leading to a contraction in trading activity and increased regulatory scrutiny. However, the market has since recovered and continues to play an important role in the global financial system.