Some analysts argue that such figures inaptly portray the picture, but they still consider the market sizeable. In accordance with the Bank of International Settlements’ insights, the total outstanding notional principal stood at a towering $640 trillion in the first half of 2019. ![]() The global derivatives market is colossal in size. However, some players also use it to exploit any arbitrage profit available due to price differential while others (usually day-traders) speculate changes in the market. Businesses and financial institutions use them to adjust the actual risk with the quantum of risk they wish to take.ĭerivatives, therefore, primarily serve the purpose of risk management and hedging. This underlying can be an asset, interest rate, or currency. ![]() Derivatives are complex financial instruments deriving their value from an underlying.
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