Financial derivatives: refers to its value dependent on Basic assets (underlyings ) Contracts in value changes (Contracts). The contract can be standardized or non-standardized.
Standardization contract refers to the transaction price, trading hours, asset characteristics, trading methods of the subject matter (basic assets), and the secondary contract is listed in the exchange. Such as the period
Non-standard contract refers to the above parties of the above, there is a strong flexibility. For example, the long-term agreement.
Financial derivatives have the following features:
1. zero and game . is a contract transaction Both parties (in a standardized contract due to uncertain) profit and loss is completely negatively correlated, and net profit and loss is zero, it is called "zero and".
2. High leverage. < / b> The transaction of derivatives adopts margin (margin) system. That is, the minimum fund required by the exchange only needs to meet a percentage of basic asset value. Margin can be divided into Initial Margin, maintaining a margin, and takes Marking to Market system during the transaction, if the proportion of margin in the transaction is lower than the proportion of maintenance margin, Then, the Margin Call will be received, and if the investor does not have a timely subsidiary, it will be forced to have a good position. It can be seen that the derivative transaction has high risk high-risk.
Financial derivatives The role is to avoid risks, the price discovery, it is a good way to hedge asset risk. However, there is a good side of anything, there is a bad side, risk avoidance, there must be someone to bear, the high leverage of derivatives is huge The risk shifts to the people who are willing to bear, called Specuers (speculator ), and the one of the circumventive risk is called hedges (hedger), Another type of trader is called Arbitraries (arbitrager) These three types of traders are maintained together The above functions of the financial derivative product market.
From the types and definitions of financial derivatives, the biggest feature is to rely on an investment mechanism to avoid the risk of funding, and have in the financial market. The hype is traded, attracting the functions of investors.
Improper financial derivatives will lead to huge risks, some are even disastrous, foreign countries have Bahrain Bank events, P & G incidents, LTCM events, belonguses, China's country-owned copper , China Aviation Oil Events.
Product Morphology Classification
(1) According to the product form. It can be divided into four major categoriescent, futures, options, and drop-down.
The forward contracts and futures contracts are all transactions in the future, at a particular time in the future, with a particular price, trading of a particular quantity and quality asset. The futures contract is a standardized contract developed by the futures exchange, and has made a uniform provision for the type, quantity and quality of the assets of the contract to the period and its trading. The long-term contract is a contract that is signed by the buyer and sellers based on the special needs of the buyers and sellers. Therefore, the flow of futures transactions is high, and the long-term transactions are low.
The swap contract is a contract that is signed by the two parties to exchange some of the assets in the future. More accurately, he said that the swap contract is a contract that exchanges in the future to exchange in a certain period of time, in a certain period of the party, to believe in cash flow (Cash Flow). More common is interest rate swap contracts and currency swap contracts. The exchange currency specified in the swap contract is the same currency, the interest rate swap; is a foreign currency, it is a currency swap.
Option contract is the transaction of trading rights. The option contract sets the right to sell a particular kind of specified species, quantity, quality zhenogenetic assets at a particular time. The option contract has a standardized contract listed on the exchange, as well as non-standard contracts traded in counter.
Native Asset Classification
(2) can be divided into four categories according to the native assets, ie stock, interest rate, currency and commodity. If it is divided, the stock class includes the specific stock and the stock index formed by the stock combination; the interest rate class can be divided into short-term interest rates represented by short-term deposit interest rates and long-term interest rates represented by long-term bond interest rates; The currency class includes a variety of different currencies: a commodity class includes various types of physical commodities.
Trading Method Classification
(3) According to the transaction method, it can be divided into field transactions and field literati.
Field transaction, also known as the transaction transaction, refers to the transaction method of all supply and demand focused on bidding transactions in the exchange. Such trading methods have the exchange of margins to trading participants, and is responsible for clearing and assigning compliance guarantee responsibilities. In addition, since each investor has different needs, the exchange is in advance to design a standardized financial contract, and investors choose the contract and quantity closest to itself. All traders focus on a place to trade, which increases the density of the transaction, usually forms a high liquidity market. Futures trading and some standardization option contract transactions belong to this trading method.
Overseigh transactions, also known as counter transactions, refers to the transaction methods of the transaction directly become trading opponents. This kind of trading method has many forms, which can design different contents of products according to different needs of each user. At the same time, in order to meet the specific requirements of our customers, financial institutions selling derivatives need to have superb financial technology and risk management capabilities. Field transactions continue to produce financial innovation. However, since each transaction is based on the transaction, transaction participants are limited to customers with high credit. A swap transaction and long-term trading is a derivative product with representative counter transactions.
According to statistics, in the position of financial derivatives, according to the trading form classification, the long-term trading is the largest, accounting for 42% of the overall position, and the following is a swap (27%), Futures (18%) and options (13%). According to the transaction target, the financial derivative product transaction of interest rates in interest rates, interest rate forward transactions, etc., is 62%, and below is 62%, and the following is the currency derivative (37%) and stock, goods derived. (1%), from 1989 to 1995, the market size of financial derivatives has expanded 5.7 times. The gap between various trading forms and various transaction objects is not large, and the overall high-speed tendency is expanded.
Financial Derivative Tool
Financial Derivative Tool , also known as "financial derivatives", is a concept corresponding to the basic financial product, refers to establishing Above the basic product or basic variable, its price is a derived financial product with the price (or value) of the basic financial product. The basic product herein is a relatively concept, not only including spot financial products (such as bonds, stocks, bank regular deposits, etc.), but also financial derivatives. As the financial derivatives foundation, variables include interest rates, exchange rates, all kinds of price index, or even weather (temperature) index, etc.
Financial assets are financially innovative products, which is to help financial institution managers better risk control by creating financial instruments. This tool is called financial derivatives. The main financial derivatives are: long-term contracts, financial futures, options and interchanges.