摘要:This paper starts with analysis why the U.S. sub-prime crisis had been caused, which mainly describes the inspiration of the U.S.
paid and the way in which they are to be calculated.
According to the underlying assets, financial derivatives can be classified into commodity derivatives, interest rate derivatives, exchange rate derivatives and equity derivatives (Merton H Miller, 1997). There are two distinct groups of derivative contracts, which are distinguished by the location they are traded in the market: Over-the-counter (OTC) derivatives and Exchange-traded derivative contracts (ETD). There are several advantages to trade on exchanges such as high liquidity, low transaction costs, standardize contract terms and low credit risk, while OTC derivatives have a better flexibility.
Generally speaking, what we call ‘four types of financial derivatives’ is determined by the way of transaction, that is, forward contracts, futures contracts, options contracts and swaps(Merton H Miller, 1997) . More complex derivatives can be created by combining the elements of these basic types. For example, the holder of a swaption has the right, but not the obligation, to enter into a swap on or before a specified future date. The main types are illustrated in figure 1.
2.1.3 Characteristics of financial derivatives
Although financial derivatives are developed from underlying financial products, there are some differences.
Firstly, prices of financial derivatives fluctuate with the change of their underlying financial products, because the value of financial derivatives is calculated on basis of their underlying assets. The intrinsic value of financial derivatives is the current value of the difference between the market value of the underlying assets and the negotiated value, and the time value is the price fluctuation of the underlying assets during the period of the contract.
Secondly, it is the high leverage of financial derivatives. During the transaction, there is no need to pay the whole value of the underlying asset. Only a certain percentage of margins are required to gain the right of transaction. These kinds of financial leverages are mostly used in the operation of financial derivatives. So through using only a small amount of funds, participants can control a contract that is of great value.
The third one is that, there is no actual value in financial derivative itself, it only represent a right to gain profits. Holders of financial derivatives can gain profits as long as they make right decisions, so financial derivatives can be regarded as a kind of fictitious assets. From stocks, bonds to futures, options and finally to index futures, options, the degree of the fiction is greater. They are becoming farther away from the fundamental economy. Accordingly, the fluctuation of the price is greater. In the end, the scale of financial derivative market will exceed that of fundamental financial market in a great extent.
The fourth point is that transaction of financial derivatives assembles all risks in every aspect of social economy and then distribute the risks in limited financial derivative markets. On the one hand, the original purpose of financial derivative market is to offer a risk replacing market with high liquidity, the risks in which can be transferred and avoided. On the other hand, due to the complexity and leveragity of the financial derivative itself, it is also made to be of high risk. Many econimists consider financial derivatives with obvious speculation and fiction a d
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