The International Swaps and Derivatives Association (ISDA) published a 40th anniversary report on the value of derivatives and how different types of entities use them, alongside informal commentary from Chief Executive Officer Scott O’Malia in derivatiViews. Based on analysis of nearly 1,200 companies across seven major stock indices, the report concludes derivatives use is widespread, with 87% of firms using them. The report highlights uses including risk transfer, liquidity management and return enhancement, and describes derivatives as tools to lock in financing terms, reduce costs and dampen the impact of market volatility. It cites academic findings including a study of almost 7,000 firms in 47 countries linking derivatives use to lower cashflow volatility, reduced financing costs, higher returns and greater investment capacity, and another study of over 14,000 companies showing smaller equity value declines after rate hikes among firms hedging interest rate risk on variable-rate debt. Examples include manufacturers using interest rate swaps, exporters using foreign exchange forwards, pension funds using swaps, swaptions and options, and mortgage providers using swaps and options to manage interest rate and prepayment risks. ISDA will discuss the report at its Annual General Meeting in Amsterdam on May 13-15.
ISDA 2025-03-24
International Swaps and Derivatives Association publishes report finding 87% of major listed companies use derivatives
The International Swaps and Derivatives Association (ISDA) released a 40th anniversary report highlighting derivatives' widespread use among 87% of firms, emphasizing their role in risk transfer, liquidity management, and return enhancement. The report, to be discussed at ISDA's Annual General Meeting in Amsterdam on May 13-15, includes academic findings linking derivatives use to reduced cashflow volatility and financing costs, higher returns, and greater investment capacity.