A Study On The Applications Of Financial Swap In Our Country

After over twenty years development and consummation, financial swaps trade has become one of the biggest funding facilities of the international financial market, causing increasing important influence on the international financial market and countries with open economy. Meanwhile, with our country merging into the global economy, opening and application of the financial swaps trade of our country is but a must.This paper studies foreign financial swaps trade, and its initiative, function, effect and concerning laws, and through learning from international legislation and supervision to study the opening, application and legislation supervision of the financial swaps trade of our country.This paper reviews the development history of domestic and foreign financial swaps trade. Based on the elaboration on the theory and analysis tools of domestic and foreign financial swaps trade, it mainly uses portfolio selection theory, MM theory, Arbitrage pricing theory and Value at risk theory, and by learning from Assets Securitization and taking into consideration of the fact that our state owned commercial banks have a large amount of defective loans to study the application of aforesaid theories in the risk management and treatment of the defective loans of our state owned commercial banks.Major conclusion shows that opening and application of financial swaps trade can help reduce the financing cost of enterprises and meet the needs of market investors to avoid risk, what is more, through the application of swaps with bank loans as base assets, fund requirement can reach 8% of the capital sufficiency of state owned commercial banks, thus to improve the capital structure of financial institutions and to remove financial risk. What must be pointed out is that there is quite big a gap between our country and outside in the legal environments of swaps trade, and the existing laws and systems about contract, foreign currency, guarantee, bankruptcy and securities are somewhat contradictory to deals of this sort. Suggestions for solving above problems are put forward in this paper.