The BIS said the credit derivatives market has grown with the entry of new participants like insurance companies and hedge funds, and the instruments are used beyond transactions aimed at the restructuring of banks' balance sheets. A range of new credit derivatives instruments and indexes combined with the standardisation of documentation have also helped growth.
Although the credit derivatives market has shown rapid growth, it is still small compared with other derivatives products, said a European derivatives analyst. But he expects the market to continue growing.
"The credit derivatives market will continue to grow as more and more companies get credit ratings and the focus shifts to more risky types of funding, away from bank loans to securitisation," he said.
The BIS's credit derivatives figures are slightly more than the $631.5 billion figure published recently by the International Swaps and Derivatives Association (Isda), which only covered Isda's member firms.
The BIS report also gave figures on the global equity-linked and commodity derivative markets. Equity-linked contracts grew by 52% over the three-year period to $2 trillion. Commodity derivatives contracts, the oldest type of derivatives contract, grew by a more modest 33%.