The Research On The Governance Mechanism Of International Financial Derivatives Transaction Based On Incomplete Contract Theory

International financial derivatives have developed for more than 30 years since they appeared in 1970s, and become more and more mature. They have brought great convenience to financial institutions to control the risks that exist in the financial markets, and become one of the most powerful promoters of modern economy development. But meanwhile the International financial derivatives have facilitated the worldwide speculating activities and a series of financial risks in the 1990s have brought heavy losses to the entire world economy. With the development of the derivatives, the opening of our financial derivatives market will inevitably bring impact on our economic system after the entry to the WTO, and under this background, the researches on the government mechanism of the financial derivatives transactions have significance to development of our financial derivatives markets both in the theory and practice.Financial derivatives with high release lever, high interdependence, high hypothesis and incomplete contract derivate from the base financial product. They refer to a kind of specific transaction way and also refer to the transaction process of a series of contracts .they are one kind of bilateral contract or the payment swap agreement, and their value are determined by the price of the base financial derivatives. So in nature, the financial derivatives are a kind of incomplete contract.This essay has researched on the government mechanism regarding the adverse selection and moral hazard problem that exist in the international finance derivatives transactions from the incomplete contract angle. In the incomplete contract theory, the adverse selection problem can be solved through a signal transmission model, in which the signal is sent out by a specialized rating organization. As for the moral hazard problem, referring to viewpoint in the Williamson's transaction cost economics, we need adopt different government method to govern the financial derivatives which have different nature and characteristics in order to solve this problem.Through the analysis on the adverse selection and moral hazard problem which exist in the international derivatives, this essay concludes that we should adopt different government method to govern different international derivatives according to their different nature and the characteristics, so that we can achieve the goal of controlling the finance risks.