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Options on Debt Derivatives Nearing $100 Billion

Market has nearly doubled in the past year, reflecting anticipation of impending volatility in bond prices.

By Abigail Moses, Bloomberg | Updated on June 24, 2013

The market for options on credit derivatives indexes has surged more than 40 percent in the past month to $98.8 billion as investors search farther afield for cheap hedges protecting against a sell-off in the bond markets.

The contracts, which give investors the right but not the obligation to buy or sell indexes of credit-default swaps at a certain price, have doubled from $48.7 billion a year ago, Depository Trust & Clearing Corp. data show. That compares with a 17 percent drop in the amount covered by swaps benchmarks on U.S. and European investment-grade debt and a 4 percent decline for all credit derivative products in the year through June 14.

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