-20-
That transaction involved an exchange of payments in Swiss francs
for payments in deutschmarks. The first interest rate swap was
negotiated with the Student Loan Marketing Association in 1982.
The first commodity swap occurred in 1986.
2. Growth of the Interest Rate Swaps Market
Interest rate swaps were the most common swaps during the
relevant years. In 1992, dealers generally participated in four
to five interest rate swaps daily and one currency swap every 2
days. The corresponding figures for 1987 were three interest
rate swaps every 2 days and one currency swap every 4 days. A
dealer’s use of commodity swaps during 1987 and 1992 also was
less common than the dealer’s use of interest rate swaps during
the same years.
The outstanding notional amount of interest rate swaps
worldwide totaled approximately $683 billion, $12.8 trillion, and
$43 trillion at the end of 1987, 1995, and 1999, respectively.8
The growth of the outstanding notional amount of interest rate
swaps is attributable primarily to the use of interest rate swaps
as an effective, inexpensive way in which to manage financial
risks from interest rate fluctuations. Those who use financial
derivatives in general can identify, isolate, and manage
separately the fundamental risks and other characteristics which
8 The outstanding notional principal of currency swaps at
the end of 1999 is estimated at approximately $2 trillion.
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011