CDS market soars but equities shrink in late 2007

The credit default swap (CDS) market grew at record rates in the second half of last year, but equity derivatives shrunk for the first time since 2004, according to figures released today by the Bank for International Settlements (BIS).

The BIS' latest survey of the over-the-counter derivatives market found that outstanding OTC derivatives now totalled $596 trillion notional at the end of the year, up 15% from the figure six months earlier. As credit conditions worsened, CDS volumes grew particularly strongly, rising 36% to $58 trillion notional outstanding - though this still represented a slowdown from the 49% growth recorded in the first half of the year.

Widening CDS spreads drove up gross market value 178% to $2 trillion in