Abstract
This article addresses the following key points: At the end of June 2004, the total amount for US-based derivatives for the top 25 banks had risen to more than 18 times total bank assets. According to a British Bankers' Association survey, the credit derivatives market doubled to US$1.9 trillion from 2001 to 2002 and was expected to reach US$4.8 trillion in 2004. Research suggests there is no economically or statistically significant relationship between a firm's risk characteristics and the extent of its participation in derivatives markets. Some academicians question the value of any hedging, viewing it as a deadweight loss.
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