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The volume of financial derivatives continues to grow at a rapid pace, although the growth has shifted somewhat from the over-the-counter (OTC) market to the organized exchanges. The 37% increase in notional value on the OTC market between 1993 and 1994, while still quite brisk, represents a slowdown from the 54% advance between 1992 and 1993. Exchange-traded derivatives increased their growth, with volume up 45% in 1994 in contrast to a mere 24% in 1993. Some observers attribute this shift to a heightened concern with risk that has scared investors away from the more comlicated and exotic instruments of the OTC market. Keep in mind, however, that these numbers do not include mortgage-backed derivatives, and that notional principal does not measure exposure to risk.

Suggested citation: “Derivatives,” Federal Reserve Bank of Cleveland, Economic Trends, no. 95-12, pp. 16, 12.01.1995.

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