Last year, the size of domestic financial companies' over-the-counter derivative transactions was recorded as the largest ever.
The Financial Supervisory Service noted that the size of financial companies' over-the-counter derivative transactions reached 2.6461 quadrillion won, an increase of 1.758 trillion won (7.1%) compared to the previous year (2.4704 quadrillion won) on the 10th.
The size of financial companies' over-the-counter derivative transactions has steadily increased since 2021, rising from 1.8146 quadrillion won in 2021 to 2.4548 quadrillion won in 2022, and 2.4704 quadrillion won in 2023. Last year, it reached a record high of 2.6461 quadrillion won.
Last year, the amounts of currency forwards and interest rate swaps significantly increased, rising 6% and 9.4%, respectively, compared to the previous year. Currency forwards are contracts for buying and selling foreign currency at a specific rate, designed to minimize risk in the case of significant exchange rate fluctuations. Interest rate swaps are contracts that exchange different interest payment methods over a certain period. They help minimize interest rate fluctuations by converting variable rates to fixed rates or vice versa. The increase in currency forward transactions is attributed to the rise in external trade volume and growing demand for foreign exchange hedging due to greater exchange rate volatility. Interest rate swap transactions increased as the possibility of interest rate cuts was raised against a backdrop of high interest rates last year.
The outstanding balance of over-the-counter derivative transactions was 1.4348 quadrillion won, an increase of 1.057 trillion won (8%) compared to the end of the previous year. By product, interest-related transactions accounted for the largest share at 61.6%, while by region, banks held the largest proportion at 76.8%.
By underlying asset, the transaction size for currency-related transactions dominated at 1.9328 quadrillion won (73%). Interest-related transactions followed at 24.8%, equity-related at 1.8%, and credit-related at 0.1%. The outstanding balance consisted of 61.6% for interest-related transactions, 36.8% for currency-related, 0.8% for equity-related, and 0.6% for credit-related.