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y’s regulatory mechanism with that of the US which is much more mature. After the comparison, we will draw some issues of the China’s financial derivative market and that’s the content of the fifth part. The sixth part, some suggestions for the financial derivative market, is relative to the fifth part according to the issues suggested in the fifth part.
 
2 Theoretic knowledge of financial derivative market
2.1 Financial derivatives
2.1.1 Definition of financial derivatives
Financial derivatives, which appeared in the 1970’s, rapidly developed to be a kind of widely influenced financial products under the trend of economic globalization. Financial derivative were endowed with many different meanings when they were used on account of their characteristic such as diversity, liquidity and complexity. So they do not form a uniform definition till now. In our country, we also call them ‘instruments’ or ‘products’.
According to International Swaps and Derivatives Association (ISDA), financial derivatives concern with the swap for cash flows and transfer risks for traders as bilateral contracts. When the contracts are due, the amount owed to another part is determined by the underlying assets, securities or prices. isda.org
To summarize all, ‘financial derivatives’ is the collective name used for a broad class of financial instruments that derive their value from other financial instruments (known as the underlying), events or conditions. The prices of financial derivatives are fixed on the basis of the change of expected values of underlying assets. If we view underlying assets as fundamental materials of construction, then financial derivatives are the constructions built by these basic materials. These underlying assets usually includes metals, bonds, securities, interest rate, foreign exchange rate, index and so on. The prices of financial derivatives fluctuate with change of the prices of underlying assets that are previously considered to be the materials, just like the prices of houses fluctuating with change of the prices of building materials and land.
 
2.1.2 Types of financial derivatives
Financial derivative market belongs to the range of capital markets. There are several ways to classify financial derivatives such as trading methods and characteristics, underlying assets, trading locations. According to the trading methods and characteristics, financial derivatives can be sorted into futures contracts, forward contracts, options contracts and swaps. A futures contract is an agreement to buy or sell an asset at a certain time in the future for a certain price. A forward contract is similar to a futures contract. A futures contract differs from a forward contract in that the futures contract is a standardized contract written by a clearing house that operates an exchange where the contract can be bought and sold, while a forward contract is a non-standardized contract written by the parties themselves. There are two basic types of options: calls and puts. A call option gives the holder the right to buy an asset by a certain date for a certain price. A put option gives the holder the right to sell an asset by a certain date for a certain price. A swap is an agreement between two companies to exchange cash flows in the future. The agreement defines the dates when the cash flows are to be本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。