On Financial Derivatives And Risk - Averse

A modern financial market is consisted of basic financial market and derivative financial market. Whether there is a huge Derivative Market has already become a criterion to measure the development of the financial market of a country. In 1990s,international financial market has undergone constant changes, with consecutive imprudent operation of derivative financial instruments, which led to loss of over one billion dollars. Therefore, the development of financial market and the risks it involves is particularly remarkable. As important investment tool, derivative financial instrument is not the risk source .The risks are due to the use and management of investors. But without suitable types and ways to transfer risks, the risks will be magnified. So it is difficult for investors to creatively use different financial tools to solve financial problems and find the best match of risk and profit. Given the abovementioned questions, this paper will start with some basic theories to analyze the financial risks of financial instruments and to do some basic research of how to reduce risks. Last the paper will also present some suggestions to the development of Chinese financial market with discussions of some cases.