ISDA Publishes Year-End 2005 Market Survey.

SINGAPORE -- The International Swaps and Derivatives Association (ISDA) today announced the results of its Year-End 2005 Market Survey of privately negotiated derivatives. The notional principal outstanding volume of credit default swaps grew 39 percent from $12.4 trillion to $17.3 trillion, compared with 48 percent growth during the first half of 2005. Growth for the whole of 2005 was 105 percent, compared with 123 percent during 2004. The survey monitors credit default swaps on single-names, baskets and portfolios of credits and index trades.

Notional amounts of interest rate derivatives outstanding, which include interest rate swaps and options and cross-currency interest rate swaps, grew almost 6 percent to $213.2 trillion in the second half of 2005. This is a 16 percent increase from one year ago, and is in line with gradually decelerating growth rates for interest rate derivatives.

Notional amounts of equity derivatives outstanding, consisting of equity swaps, options, and forwards, grew 15 percent from $4.8 trillion to $5.6 trillion in the 2005 second half. Annual growth was almost 34 percent, compared with 28 percent during 2004.

The above notional amounts, which total $236.0 trillion across asset classes, are an approximate measure of derivatives activity, and reflect both new transactions and those from previous periods. The amounts do not, however, represent the risks associated with the activity; in order to determine risk, it is necessary to estimate net replacement cost, which ISDA does not collect.

The Bank for International Settlements (BIS) collects both notional amounts and market values in its derivatives statistics and it is possible to use the BIS statistics to determine the amount at risk in the ISDA survey results. In the most recent BIS report, gross mark-to-market value is approximately 4 percent of notional amount outstanding. In addition, net credit exposure (after netting but before collateral) is 0.7 percent of notional amount outstanding. Applying these percentages to the total ISDA Market Survey notional amount outstanding of $236.0 trillion, gross credit exposure before netting is estimated to be $9.4 trillion and credit exposure after netting is estimated to be $1.7 trillion.

"Continuing innovation in the derivatives business is leading a larger number of firms from more industries and more geographic regions to embrace the use of these important risk management tools," said Robert Pickel, Chief Executive Officer and Executive Director of ISDA. "Since its inception in 1985, ISDA has fostered and enabled this innovation through its legal, documentation, netting, public policy, operations and risk management initiatives around the world. As a result our business continues to be strong and vibrant and ISDA continues to attract more swaps participants to its membership."

The ISDA Year-End 2005 Market Survey reports notional amounts outstanding for the interest rate derivatives, credit default swaps, and over-the-counter equity derivatives as of December 30, 2005. All notional amounts have been adjusted for double counting of inter-dealer transactions. ISDA surveys its Primary Membership twice yearly on a confidential basis. In this survey, 98 firms provided data on interest rate swaps; 86 provided responses on credit derivatives; and 83 provided responses on equity derivatives. Although participation in the Survey is voluntary, all major derivatives houses provided responses.

About ISDA

ISDA, which represents participants in the privately negotiated derivatives industry, is the largest global financial trade association by number of member firms. ISDA was chartered in 1985, and today has approximately 700 member institutions from 50 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org.