| Based on traditional financial tools, financial derivative instruments came into existence in 1970s. Because of their double-function of hedging and investment, they have become one of the main transactional tools in international financial markets.Financial derivative instruments are very important for the innovation and development of a country's or a region's financial market. They help to hedge investment risks and guarantee the security, liquidity and profitability of markets. They are also a necessary condition to establish an international financial center. By means of the function of risk management and price discover of derivative instruments, it will improve the efficiency of resource allocation, helps the government master the economic information and enriches the means of macro-adjustment.Therefore, developing the market of financial derivative instruments and deepening financial innovation is a way to establish a secure barrier for national economic development. It will alleviate the concussion induced by China's entry into the WTO, and helps to improve the comprehensive competitiveness of financial market in China.The structure of this paper is organized as follows: at first, it summarizes the meaning and types of financial innovation briefly, and depicts the status of financial innovation in China. Following to this, it introduces the concept, characteristics of derivative instruments. Then, we study the risk structure and risk evaluation of it deeply. And then, it analyzes the impact of financial innovation to the development of derivative instruments, and demonstrates that it is necessary and feasible to establish the market of derivative instruments in China. At last, it reveals the inspire of the development of Hongkong's derivative instruments to the mainland, and comes up with some policy proposals. |
