Derivatives and the real economy

• Authors: Juraj Sipko
• Languages of publication: EN

Abstracts

EN

The paper describes the development of the derivatives market and compares it with the development of the real economy. Based on official data the paper describes how the derivatives market has significantly increased its volume of trading, mainly after the abolishment of the Glass-Steagal Act. The growing volume of the derivatives market also significantly contributed to the global financial crisis. This paper also compares the growth of the global nominal and real gross domestic product with the pace of growth of the overall derivatives market, but mainly the over-the-counter market. Based on preliminary findings, the paper came to the conclusion that it is critical to implement all the requisite measures in order to eliminate non-transparent transactions with certain derivatives products in order to put the global economy on a sustainable, solid and balanced economic growth path.

Keywords

EN

credit default swap; derivatives; derivatives market; over-the counter market

• Publisher: Sciendo
• Journal: Creative and Knowledge Society
• Year: 2011
• Volume: 1
• Issue: 1
• Pages: 33-43

Dates

published

2011-08-01

online

2011-10-29

Contributors

author

Juraj Sipko

• Faculty Economy and Business, Paneuropean University, Tematinská 10, 851 05 Bratislava

References

• Acharya, V V and L H Pedersen (2005): "Asset pricing with liquidity risk", Journal of Financial Economics, vol 77, no 2, pp 375-410.
• Acharya, V V and S Viswanathan 2008: Moral hazard, collateral and liquidity, CEPR Discussion Papers 6630, Centre for Economic Policy Research.
• Bank for International Settlements, Annual Report (2000-2011).
• Borio, C E V and H Zhu (2009): "Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?" BIS Working Papers, no 268, Basel.
• Castren, O, S Dees and F Zaher (2008): "Global macro-financial shocks and expected default frequencies in the euro area", European Central Bank Working Paper Series, no 875.
• Dees, S and I Vansteenkiste (2007): "The transmission of US cyclical developments to the rest of the world", European Central Bank Working Paper Series, no 798.
• De Graeve, F, T Kick and M Koetter (2008): "Monetary policy and financial (in)stability: an integrated micro-macro approach", Journal of Financial Stability, vol 4, no 3, pp 205-31.
• Estrella, A and G Hardouvelis (1991): "The term structure as a predictor of real economic activity", Journal of Finance, vol 46, pp 555-76.
• Fisher, I (1933): "The debt-deflation theory of great depressions", Econometrica, vol 1, no 4, pp 337-57.
• Gilchrist, S, V Yankov and E Zakrajšek (2009): "Credit market shocks and economic fluctuations: evidence from corporate bond and stock markets", Journal of Monetary Economics, vol 56, no 4, pp 471-93.
• G20 Communique (2008-2010).
• Gorton, G 2008: "The Panic of 2007", NBER Working Papers, no 14358.
• Harvey, C R (1991): "The term structure and world economic growth", The Journal of Fixed Income, vol 1, pp 7-19.
• International Monetary Fund, Global Financial Stability (2006-2010).
• Joint Working Group of the Financial Stability Forum and the Committee on the Global Financial System 2009: "The role of valuation and leverage in procyclicality", CGFS Papers, no 34.
• McCarthy, J and R W Peach (2004): "Are home prices the next ‘bubble’?", Federal Reserve Bank of New York Economic Policy Review, vol 10, no 3, pp 1-17.
• Qi, Mand X Yang (2009): "Loss given default of high loan-to-value residential mortgages", Journal of Banking and Finance, vol 33, no 5, pp 788-99.[WoS]
• Segoviano, M (2006): "Conditional Probability of Default Methodology", Financial Markets Group Discussion Paper 558. London School of Economics.
• Strahan, P 2008: "Liquidity production in 21st century banking", NBER Working Papers, no 13798.
• Zhu, H (2008): "Capital regulation and banks' financial decisions", International Journal of Central Banking, vol 4, no 1, pp 165-211.

Identifiers

DOI

10.2478/v10212-011-0003-7