|By Marketwired .||
|March 26, 2014 06:10 AM EDT||
LOS ANGELES, CA -- (Marketwired) -- 03/26/14 -- A new study by the Milken Institute shows the benefits to the wider economy from the use of financial derivatives. "Deriving the Economic Impact of Derivatives: Growth Through Risk Management" is a first-of-its-kind study of derivatives' quantitative impact on economic growth; it charts the positive effects in the U.S. economy from their use, both in the financial and non-financial sectors.
The study found that:
- Banks' use of derivatives, by permitting greater extension of credit to the private sector, combined with the use of derivatives by non-financial firms, expanded U.S. real GDP for about $3.7 billion each quarter from 2003 to 2012.
- The total increase in economic activity was 1.1 percent ($149.5 billion) between 2003 and 2012.
- By the end of 2012, employment had been boosted in these years by 530,400 (0.6 percent) and industrial production 2.1 percent, due to the use of derivatives.
"When properly used, many derivative products can mitigate the escalation of uncertainty that can freeze investment or hiring plans," says Ross DeVol, chief research officer at the Institute. "The statistical evidence supporting derivatives' ability to promote growth is overwhelming."
To understand the study's findings, it is important to understand how they were derived. The use of derivatives by banks and non-financial firms has an indirect impact on economic growth via multiple channels. To gauge the overall impact, the analysis is divided into two steps. First, researchers estimated the influence of banks' use of derivatives in lending and also the effects stemming from their use by non-financial firms on the value of those firms. Second, researchers linked these results to the economy overall.
Although derivatives influence the U.S. economy in several ways, the Milken Institute research focuses especially on credit extension and firm value. The Institute's statistical analysis demonstrates that the use of derivatives by banks allows for a larger volume of commercial and industrial loans, increasing business investment. It also confirms that investors assign higher valuations to non-financial firms that use derivative products -- valuations that boost their willingness and ability to expand operations.
The report points out that trading of derivatives takes place in two types of markets: organized exchanges and over the counter. Exchange-traded derivatives employ a clearinghouse that serves as a counterparty. Derivatives traded through the OTC market are privately negotiated and customized to the specifications of the counterparties involved.
Many mistakenly fault derivatives for the disruptions that were in fact caused by overleverage. For example, the U.S. Financial Crisis Inquiry Commission (FCIC) identified credit default swaps, an OTC derivative, as one of eight major factors that contributed to the financial crisis. One principal factor identified by the FCIC was leverage -- the use of borrowed funds for making investments -- that permeated the financial system.
The outlook for derivatives is veiled by regulatory changes taking place in the United States and other major markets, conclude the authors of the new study. But the past suggests that derivatives will continue to play a key role in finance; their continued contribution to economic growth will depend on the markets becoming more transparent and liquid, enabling end users to generate competitive returns while effectively hedging risk.
"Deriving the Economic Impact of Derivatives: Growth Through Risk Management," is by Apanard (Penny) Prabha, Keith Savard and Heather Wickramarachi, with project direction from Ross DeVol and Perry Wong. This research was supported, in part, by CME Group. The report is available for download at no charge at http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=38801468&cat=resrep.
About the Milken Institute
A nonprofit, nonpartisan think tank, the Milken Institute believes in the power of capital markets to solve urgent social and economic challenges. Its mission is to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital and enhance health.
Director of Communications
In recent years, containers have taken the world by storm. Companies of all sizes and industries have realized the massive benefits of containers, such as unprecedented mobility, higher hardware utilization, and increased flexibility and agility; however, many containers today are non-persistent. Containers without persistence miss out on many benefits, and in many cases simply pass the responsibility of persistence onto other infrastructure, adding additional complexity.
Apr. 28, 2017 03:45 PM EDT Reads: 2,350
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend @CloudExpo | @ThingsExpo, June 6-8, 2017, at the Javits Center in New York City, NY and October 31 - November 2, 2017, Santa Clara Convention Center, CA. Learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
Apr. 28, 2017 03:30 PM EDT Reads: 1,450
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
Apr. 28, 2017 02:30 PM EDT Reads: 3,235
SYS-CON Events announced today that Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Juniper Networks challenges the status quo with products, solutions and services that transform the economics of networking. The company co-innovates with customers and partners to deliver automated, scalable and secure network...
Apr. 28, 2017 02:30 PM EDT Reads: 4,996
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm. In his Day 3 Keynote at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will explore t...
Apr. 28, 2017 02:30 PM EDT Reads: 910
SYS-CON Events announced today that CA Technologies has been named "Platinum Sponsor" of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, New York, and 21st International Cloud Expo, which will take place in November in Silicon Valley, California.
Apr. 28, 2017 02:15 PM EDT Reads: 2,516
Five years ago development was seen as a dead-end career, now it’s anything but – with an explosion in mobile and IoT initiatives increasing the demand for skilled engineers. But apart from having a ready supply of great coders, what constitutes true ‘DevOps Royalty’? It’ll be the ability to craft resilient architectures, supportability, security everywhere across the software lifecycle. In his keynote at @DevOpsSummit at 20th Cloud Expo, Jeffrey Scheaffer, GM and SVP, Continuous Delivery Busine...
Apr. 28, 2017 02:15 PM EDT Reads: 1,150
Back in February of 2017, Andrew Clay Schafer of Pivotal tweeted the following: “seriously tho, the whole software industry is stuck on deployment when we desperately need architecture and telemetry.” Intrigue in a 140 characters. For me, I hear Andrew saying, “we’re jumping to step 5 before we’ve successfully completed steps 1-4.”
Apr. 28, 2017 02:00 PM EDT Reads: 1,883
New competitors, disruptive technologies, and growing expectations are pushing every business to both adopt and deliver new digital services. This ‘Digital Transformation’ demands rapid delivery and continuous iteration of new competitive services via multiple channels, which in turn demands new service delivery techniques – including DevOps. In this power panel at @DevOpsSummit 20th Cloud Expo, moderated by DevOps Conference Co-Chair Andi Mann, panelists will examine how DevOps helps to meet th...
Apr. 28, 2017 01:30 PM EDT Reads: 1,680
DevOps is being widely accepted (if not fully adopted) as essential in enterprise IT. But as Enterprise DevOps gains maturity, expands scope, and increases velocity, the need for data-driven decisions across teams becomes more acute. DevOps teams in any modern business must wrangle the ‘digital exhaust’ from the delivery toolchain, "pervasive" and "cognitive" computing, APIs and services, mobile devices and applications, the Internet of Things, and now even blockchain.
Apr. 28, 2017 01:15 PM EDT Reads: 2,779
@DevOpsSummit has been named the ‘Top DevOps Influencer' by iTrend. iTred processes millions of conversations, tweets, interactions, news articles, press releases, blog posts - and extract meaning form them and analyzes mobile and desktop software platforms used to communicate, various metadata (such as geo location), and automation tools. In overall placement, @DevOpsSummit ranked as the number one ‘DevOps Influencer' followed by @CloudExpo at third, and @MicroservicesE at 24th.
Apr. 28, 2017 12:45 PM EDT Reads: 2,936
Apr. 28, 2017 12:45 PM EDT Reads: 1,626
@GonzalezCarmen has been ranked the Number One Influencer and @ThingsExpo has been named the Number One Brand in the “M2M 2016: Top 100 Influencers and Brands” by Analytic. Onalytica analyzed tweets over the last 6 months mentioning the keywords M2M OR “Machine to Machine.” They then identified the top 100 most influential brands and individuals leading the discussion on Twitter.
Apr. 28, 2017 12:00 PM EDT Reads: 1,362
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
Apr. 28, 2017 11:45 AM EDT Reads: 1,364
SYS-CON Events announced today that Hitachi, the leading provider the Internet of Things and Digital Transformation, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Hitachi Data Systems, a wholly owned subsidiary of Hitachi, Ltd., offers an integrated portfolio of services and solutions that enable digital transformation through enhanced data management, governance, mobility and analytics. We help globa...
Apr. 28, 2017 11:30 AM EDT Reads: 2,500