Risk Managerment Of Financial Derivatives

Since 2000s, the scale of financial derivative markets has got great expandence in not only number of tradable products but kinds of products as well. Especially in the OTC, more and more innovative designs are being created, which is far beyond others, while more and more risk has been accumulated during the same time. In 2008, the risk broke out like a volcano. In this year, global financial derivative markets has arose many fameous"cases" including the crisis of "The five major investment banks" and other fameous financial institutions. And more and more losses of asset from famoeus companies are being exposured, the crisis of Subordinated Debt has threaten every country in the world. Therefore, how to control the risk of financial derivative has become an important research subject in financial field. Now considering that the banks are the major operators for the financial derivative which are just on the beginning steps in the commercial banks in China, the technology of recognition, management and the systematic research on the risk of these products is still deficient. It is very important for the banks in China because it is one part of a complete financial structure which take important part in improving the commercial bank's competence and it is useful to raise the capacity of banks to compete with others.The paper analyzes the characteristics and reasons of the risk of financial derivatives basing on the definition, background, characteristics and classification of them. During the same time, the paper also analyze the causes of the risk in China under the careful consideration on our own country. Considering that major derivative of banks in China is interest-related tool, the paper use "VaR" method to discuss the risk management of it. By the comparison of international advanced supervision system and advanced risk management theory, the paper tries to give proposal advice from macro-economics and the micro-economics mechanism including the choosing of suitable risk measurement models, completing the supervisory system construction and quantitative analysis models. Finally, the paper also analyzes the special risk-risk of manipulation about Stock Index Futures by quantitative analysis because it will have great influence on the design of new derivatives of our banks.