I recently heard that Deutsche Bank had $72trillion of "derivatives exposure", which is many times greater then the entire German GDP.
Now as I understand it, derivatives are essentially just bets on the movement of assorted prices... so I am assuming that "derivatives exposure" means the total amount you would have to pay out if you lost every single one of your bets. The likelyhood of this scenario may of course be vanishingly small, but presumably with $72trillion of exposure, you wouldn't need much of a losing streak in order to leave you bankrupt.
So some people are saying - "ooh this looks scary, it could lead to disaster"... but my reaction is "ooh this is scary... but why on earth hasn't it led to disaster already?".
Now I know there were multiple disasters around 2007/8 already and derivatives may have played a significant role in that... but I'm referring to, lets say, the past five years. How could Deutsche Bank have gotten to $72trillion of exposure without blowing up again? What kind of bets have they been doing such that they haven't had enormous losses?