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nt risk, and inadvertent operation will lead to a huge chain of negative effects. Therefore, from the derivative markets in many countries, economic and regulatory protection of the derivative markets has become the necessary measures of the sound development.

3. Analysis on the financial crisis in the aspect of regulation
3.1 Generalize the relationship between financial crisis and financial derivatives
The U.S. sub-prime mortgage crisis erupted in 2007, and it caused widespread concern around the world. The crisis developed quickly into a global financial crisis in a very short period of time. Influenced by global financial crisis, stock prices, commodity prices and exchange rates of major currencies fluctuated sharply (Prosperetti, L 2009). In 2009, the impact of financial crisis on the industry and manufacturing sector is also increasingly evident. The financial crisis spreading so widely and rapidly shows that economic globalization has entered an advanced stage of financial globalization. Financial crises are much related to the financial derivative products which play an important role of propeller of the economic development (Dam, KW 2009).
Financial derivatives not only have the function of risk diversification, but also enlarge the risk. In order to pursue high profits and selling points, Wall Street investment bank created endless stream of financial derivatives, such as mortgage-backed securities (MBS), collateralized debt obligations (CDO), credit default swaps instruments (CDS), etc. The size of financial derivatives expanded to 106 trillion dollars in 2002, 258 trillion dollars in 2004, nearly 600 trillion dollars in 2007. The value of financial derivatives is 35 times the U.S. GDP. High risk always hides in high return (Dam, KW 2009b). These overly innovative and complex financial derivatives gradually divorced from the real economy. ‘Stock God’ Buffet regarded financial derivatives as ‘weapons of mass financial destruction’, and the potential threat could be ‘fatal’ (Dam, KW 2009a). However, it is the support from Federal Reserve, lack of supervision and policy failures that leaded to the proliferation of financial derivative. The Federal Reserve wrong financial control policies resulted in excessive financial derivatives. In addition, the United States long-term policy of low interest rate had led to excess liquidity, resulting in the continued prosperity of the U.S. real state industry and promoting the excessive competition of the sub-prime mortgage market (Prosperetti, L 2009).
It can be concluded that it is the MBS, CDO, CDS and other financial derivatives that promote the U.S. sub-prime crisis (Hull, JC 2008a). By the promotion of credit rating agencies, these three innovative tools have created ‘technical conditions’ for the risk of sub-prime loans. As the increased openness of financial liberalization, U.S. financial institutions spread the risk of the three kinds of derivatives to the whole world (Prosperetti, L 2009). So once the first domino falls, there will be progressively ampliative chain reaction which set off a comprehensive global financial crisis with derivatives as the main transmission channels.

3.2 Study on case of Lehman Brothers
Lehman Brothers was founded by German immigrant Henry, Emanuel and Mayer in 1850 in Montgomery City, US. And it has a history of 158 year