• 27. 1. 2025 • H. T. •
Derivatives are financial (paper) contracts that derive their value from an underlying asset, such as stocks, bonds, commodities, currencies, etc.
The Notional Value vs. Market Value
- Notional Value: The total value represented by the derivatives. This figure often exceeds $1 quadrillion ($1.000 trillions) globally.
- Market Value: The actual current value of the underlying assets, estimated to be less than $300 trillion.
By this estimates there are at least 4 times more financial “bets” than there are underlying assets. But what could go wrong?
David Rogers Webb, in his book ‘The Great Taking’ discusses the potential risks and consequences of the derivatives market’s that pose systemic risks to the global financial system.
He highlights the potential for a “taking” of collateral where financial assets and bank deposits, including stocks, bonds, and other properties that are subject to credit, could be seized.
