Financial Derivatives, Credit Risk Management,

Loan-making, owing the greatest portion to all the asset business activities of commercial banks, is the main source of profit. How to prevent credit risk is indispensable in the present complicated social situation. This thesis discusses the management of loan risk of commercial banks deeply and systematically from a new angle of view-how to prevent financial risk by the means of financial derivatives.The thesis begins with the introduction of loan risk of commercial bank, and then on this basis the loan risk of commercial bank in China is analyzed. Through studying the traditional manner of risk management, namely, insurance, portfolio and asset-liability-ratios management, the article points out that the traditional manner of risk management can not meet the needs of risk precaution in such a complicated situation that the prices of financial products fluctuate so severely. Then the article introduces a new instrument tomanage risk--financial derivatives. This article analyzes the derivatives'character of unbind and divert risk, points out derivatives can manage mixed risk of credit risk and market risk effectively as a new risk management instrument prior to the conditional ones, and explores the techniques of hedge which are used to manage credit risk, interest ratio risk, exchange rate risk to decrease risk and upgrade efficiency. Like every thing has two sides, financial derivatives may bring in tremendous risk to financial institution that manages risk by financial derivatives. Finally the article put forwards some proposals of precaution of derivatives risk.