A great explanation for why the visualization of derivatives below is misleading:
https://old.reddit.com/r/dataisbeautiful/comments/3x9zbr/how_much_money_is_there_in_the_world/cy3auqq/
"So despite Michael Moore insisting that derivatives are super complicated and impossible to understand, they really are not. Simply put, derivatives constitute a variety of assets the value of which depends on other assets. Still sounds complicated? Well let's imagine you and I enter into an agreement to exchange some gold for money in three months. In other words, I come to you and say I want to buy some gold from you in three months and you agree to sell it to me for some price that we work out together, say $100. If we obligate each other to that deal through a contract, the contract is called a forward, which is a nice and simple kind of a derivative. The contract is a derivatve because the value of each end (buy vs. sell side) depends on the value of the gold. If the price of gold over the next three months drops to an all-time low, your end of the contract (to sell gold for $100) will be super valuable because whoever has your position can contractually force me to buy the agreed upon amount of gold for $100 even though it can be bought from the market for say $50. As the market price of gold drops, the selling end of the contract, called the short position, wins. By the same logic, as the market price of gold increases, the buying end of the contract, called the long position, wins.
The problem here is that if the price of gold increases to $105 for example, the short position is worth nothing. Nobody would want to hold a contract that obligates them sell gold for $100 when they can just go the market and sell it for $105. So the value of the derivative is $0, but in OP’s data the value is given as $100, which in no way is representative. Even to the long position, which can buy the $105 worth of gold for $100, the contract is only worth $5, not $100. But in OP's data, the value of the long position is also calculated as $100. So a forward contract like the one described has a value of $5 to the long position, and $–5 to the short position, but in OP's data, the "value" is given as $200.
Furthermore, most forwards, futures, and options are never "exercised,"which makes this data even more misleading. When exercising our forward contract for example, we would actually have to carry through with exchanging the gold for money on the maturity date. But most contracts are cancelled before maturity, through mutual agreement or through inaction of one of the parties (which is not really allowed in forward contracts, but is allowed for example in options).
There are also derivatives like interest rate swaps or currency swaps, but that's a bit of a different ballpark. The important thing to understand is that there is a big difference between the value of a derivative and the value of its underlying assets.
TL;DR: Derivatives are financial instruments, the value of which is represented very poorly in the data"
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
https://old.reddit.com/r/dataisbeautiful/comments/3x9zbr/how_much_money_is_there_in_the_world/cy3auqq/
"So despite Michael Moore insisting that derivatives are super complicated and impossible to understand, they really are not. Simply put, derivatives constitute a variety of assets the value of which depends on other assets. Still sounds complicated? Well let's imagine you and I enter into an agreement to exchange some gold for money in three months. In other words, I come to you and say I want to buy some gold from you in three months and you agree to sell it to me for some price that we work out together, say $100. If we obligate each other to that deal through a contract, the contract is called a forward, which is a nice and simple kind of a derivative. The contract is a derivatve because the value of each end (buy vs. sell side) depends on the value of the gold. If the price of gold over the next three months drops to an all-time low, your end of the contract (to sell gold for $100) will be super valuable because whoever has your position can contractually force me to buy the agreed upon amount of gold for $100 even though it can be bought from the market for say $50. As the market price of gold drops, the selling end of the contract, called the short position, wins. By the same logic, as the market price of gold increases, the buying end of the contract, called the long position, wins.
The problem here is that if the price of gold increases to $105 for example, the short position is worth nothing. Nobody would want to hold a contract that obligates them sell gold for $100 when they can just go the market and sell it for $105. So the value of the derivative is $0, but in OP’s data the value is given as $100, which in no way is representative. Even to the long position, which can buy the $105 worth of gold for $100, the contract is only worth $5, not $100. But in OP's data, the value of the long position is also calculated as $100. So a forward contract like the one described has a value of $5 to the long position, and $–5 to the short position, but in OP's data, the "value" is given as $200.
Furthermore, most forwards, futures, and options are never "exercised,"which makes this data even more misleading. When exercising our forward contract for example, we would actually have to carry through with exchanging the gold for money on the maturity date. But most contracts are cancelled before maturity, through mutual agreement or through inaction of one of the parties (which is not really allowed in forward contracts, but is allowed for example in options).
There are also derivatives like interest rate swaps or currency swaps, but that's a bit of a different ballpark. The important thing to understand is that there is a big difference between the value of a derivative and the value of its underlying assets.
TL;DR: Derivatives are financial instruments, the value of which is represented very poorly in the data"
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/