OTC derivatives notional amounts outstanding totalled $693 trillion at end-June 2013...
Gross credit exposures gross market values after legally enforceable bilateral netting but before
collateral ... jumped [at] end-June 2013 to $3.9 trillion.
Source:
www.bis.org/publ/otc_hy1311.pdf
By my calcs, that is around 0.56% of notional value exposure. wink
Obviously, you have never traded derivatives.
Well mad,
First of all, do you really believe on the FPD and PDS that this 4 large banks gives as an explanation via the OCC ?
Here it's the 2014's "explanation" on the behalf of these commercial banks:
..."Credit risk is a significant risk in bank derivatives trading activities. The notional amount of a derivative contract is a reference amount that
determines contractual payments, but it is generally not an amount at risk. The credit risk in a derivative contract is a function of a number
of variables, such as whether counterparties exchange notional principal, the volatility of the underlying market factors (interest rate,
currency, commodity, equity or corporate reference entity), the maturity and liquidity of the contract, and the creditworthiness of the
counterparty.
Credit risk in derivatives differs from credit risk in loans due to the more uncertain nature of the potential credit exposure. With a funded
loan, the amount at risk is the amount advanced to the borrower. The credit risk is unilateral; the bank faces the credit exposure of the
borrower. However, in most derivatives transactions, such as swaps (which make up the bulk of bank derivative contracts), the credit
exposure is bilateral. Each party to the contract may (and, if the contract has a long enough tenor, probably will) have a current credit
exposure to the other party at various points in time over the contract's life. Moreover, because the credit exposure is a function of
movements in market factors,
banks do not know, and can only estimate, how much the value of the derivative contract might be at various
points of time in the future.
Measuring credit exposure in derivative contracts involves identifying those contracts where a bank would lose value
if the counterparty to a
contract defaulted today. The total of all contracts with positive value (i.e., derivatives receivables) to the bank is the gross positive fair
value (GPFV) and represents an initial measurement of credit exposure. The total of all contracts with negative value (i.e., derivatives
payables) to the bank is the gross negative fair value (GNFV) and represents a measurement of the exposure the bank poses to its
counterparties."....
lol There are 10 pages of excuses and explanations on how market risk, credit risk and bilateral netting set are all aligned and working towards a transparent and trouble free trading between the counterparties....
Have you read it? and, do you really believe in it?
GPFV from interest rate contracts has fallen from $5.1 trillion at the end of 2008 to $2.6 trillion currently...as per Q2 2014.
Put that in context.... the budget for total expenditure of the United States Government during 2014 was around $3.5 trillion.... I think anyone would like to see Q4 2014 books from OCC....unfortunately it does not get published until feb-mar 2015......
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Fair enough.
You can play on semantics....
Well, we cannot possibly be a sovereign nation..... not because of England...no..... but, because USA.
One quick example is the Pine Gap .... Pine Gap, whose initial purpose was to gather intelligence concerning the performance of Soviet missiles, now provides information, virtually in real time, that can be used by a variety of US weapons systems, including drones. Pine Gap is part of America's drone killing program. If targets are selected anywhere in east Asia or the western Pacific, we are complicit in such actions. Pine Gap information is now used to help target and to perfect America's anti-ballistic missile system. China has 250 nuclear warheads, America has 7700. China, committed to a no-first-use policy from the start, may be concerned about the adequacy of its present programs, because the ABM system being put in place by America and Japan will seriously limit China's deterrent nuclear force. Pine Gap is integral in such developments. In any conflict in the western Pacific, because of the the Darwin taskforce and Pine Gap, it would be impossible to say that we are not involved. Therefore, if America goes to war in the western Pacific, we also will be at war.
It's a fair and plausible argument.....
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