Description Of Economics Of Uncertainty And Its Industrialization

According to a series of assumptions, people use the relationship of various elements, which depend on each other in the objective world, to predict the trends and results that things develop, because of the limitation of the subjective understanding. That whether the prediction is true or not, is related to not only subjectivity, objectivity and assumption, but also time span, so consumer always suffers a lot when facing the uncertainties.Consequently, a series of the financial products for avoiding risks have seen developed significantly in the process of the financial industrialization. China has integrated into the global financial market, and domestic financial markets will be further open for foreign financial institutions. For domestic financial institutions, to design financial product timely that meets the needs of the market is the only way to win market share and living space. In other words, financial product innovation will become a means for financial institutions to survive.This paper starts with assets choosing, and then discusses the significance of financial product after defining what financial product is, and at last searches the yield that maximizes the utility of consumer and the dynamic balanced growth path. In the following parts, we analyze the financial product's elements, structure, methods of designing systematically, as well as a summary of how to design financial products. Finally, some suggestion is offered after usual methods of financial product pricing are summed up.This paper alternates dynamic programming, financial engineering and financial mathematics, and explains problem with models and graphics. Some are unavoidable, others are used for convenience.Some conclusion may be drawn through this study, as follows:1. Financial product is a contract. So, financial product designing is financial contract designing that compose and decompose the elements of the contract.2. Through analyzing and comparing the utility on minimum variance curve with risk-free assets, we find that it's better to invest financial product than risk assets all. So, it's better for consumer to invest financial product.3. The essence of financial engineering is the technology and means of financial tool's and product's designing, manufacture and development, and problem solving.