Derivatives: A Market With No Value?

Lately I’ve been looking at financial markets trying to see how deep the rabbit hole goes when it comes to where the current crisis began. All roads seem to point back to the Derivatives markets and the quants that ruined them. These markets are filled with all types of financial wizardry and chainarey that would make the Mortgage Back Security crisis seem ethical. Derivative derive (sorry) their notional value from an underlying entity, usually a stock, bond or commodity. But the current market can include such exotic methods as shorting, Hedging, swapping fixed for floating interest rates, bets on defaults of companies and even institutions. The market for these have grown so much over the last 25 years that the BIS (Bank for International Settlements) estimates notional values of OTC (Over-the-Counter) and exchange traded derivatives at some where between $684 to $1,028 Trillion dollars. Thats $1,028,000,000,000,000.01!!!!  Keep in mind that World GDP is only $61.1 Trillion dollars. Where the hell is the rest of that $967 Trillion in notional value come from? Well the key word is ‘notional value‘ where on any financial instrument there is the nominal or face amount used to calculate payments made on that instrument. This ‘notional value’ will never trade hands nor can it.  So in essence it’s NOTHING, but these instruments can cause great harm as most of the Globe can currently attest to.  Now you may be thinking I will go into the typical rant about evil bankers, financiers and rampant deregulation are the cause and that these ‘weapons of mass financial destruction‘ must be outlawed.  You should know me better than that.  First, while these instruments did get out of hand and should be more regulated (and they are with requirements for trading on regulated exchanges) they are necessary evils like wars, taxes and abortions.  Finally, there must be an arbitrage opportunity in this now that most of these things will be trading on regulated exchanges. I mean how do you dip your toes into a $1,028,000,000,000,000.01 ocean of wealth that is literally worth nothing?  Just .00001% of that market is more money than I’ll ever need.  Who with me? I am starting a algorithmic trading platform to take advantage of this. Any takers? Most importantly, any programmers? jk.