Credit losses on derivatives spiked but remained well below those experienced on banks’ loan portfolios in that episode. Derivatives credit exposures, as you all know, are quite small relative to credit exposures in traditional assets, such as banks’ loans.
Moreover, every corporation already implicitly reports an estimate of option expense on its income statement. That number for most companies, of course, is exactly zero. Are option grants truly without value? As I noted earlier, critics of option expensing have also argued that expensing will make raising capital more difficult. But we need to remember that expensing is only a bookkeeping transaction.