Que the fiscally conthervative outrage at the fruits of their systemic moral corruption...
{ crickets crickets crickets }
The ‘notional value’ is meaningless. You have to look at the contract and see what the value at risk is.
Typically, derivatives contracts sold by banks to corporate customers are quite favorable to the bank, and unfavorable to the customer. On an interest-rate swap on a notional principal of $100 million, the customer might have to pay the bank $200,000 a month as long as the average 10-year Treasury is below 3%, and only be entitled to receive $150,000 a month if it goes above 3%. If the contract is for two years, the bank is highly likely to make money on the deal. In any case, the most they could lose on $100 million notional principal is $3.6 million, and that only if interest rates jump the week after the contract is signed. They are hedged even against this unlikely event.
They are a conjuring illusion. I.e. witchcraft.
How are these phantom “derivatives” classed as any sort of asset? They are deadly weight on the entire economy aand do not represent anything real or ultimately collectible.
...under the spreading derivative A.C.O.R.N. tree!
$500 trillion is just the notional amount. The actual liability is far less than that. The notional amount is just the hypothetical base amount on which the payments are calculated. You’re probably talking about a fraction of a percent of the notional amount. It’s still a big market but even that liability is contingent.
I want to know why $100 buys far less.
Who is making out like a bandit?