A Comparative Study Of ETD And OTC Financial Derivatives

Financial derivatives market is of great economic and strategic significance. It has been only thirty years since it emerged and started to develop. And the financial derivatives have been widely used, which brings to the whole financial market profound impact. As an emerging market, China will be more market-oriented and more connected to the world’s financial market after it joined WTO. As a result, it has become an important issue of how to develop Chinese financial derivatives market. That is also the question the author wants to answer.This study should be of both academic and practical significance. Firstly, it would provide a better understanding of financial derivatives market, especially about Exchange-Traded financial derivatives(ETDs) and Over-The-Counter financial derivatives(OTCs). Secondly, know better about different roles of ETDs and OTCs in this subprime crisis. Thirdly, it could offer some guiding opinions about how to develop Chinese financial derivatives market.On the basis of systematic risk, this author compares the ETDs with OTCs in terms of risks, risk prevention mechanisms and regulation system. In the context of global financial integration, compared with ETDs, OTCs are more likely to be the cause of systematic risk and to trigger a financial crisis. In the view of causes of subprime crisis, the author assesses the performance of ETDs and OTCs during the crisis and tries to infer their function by means of statistics and mathematical analysis, which deepens the comparative study between ETDs and OTCs. The author concludes that based on systematic risk prevention, considering the development phase of Chinese financial market, China should develop ETDs market first and constrain the OTCs market when necessary.What makes this study standing out is the following two points:Firstly, do a comparative study of ETD and OTC financial derivatives based on the financial derivatives market’s path of development, which helps to solve China’s problem. The obvious difference of ETDs and OTCs had been usually ignored by scholars until the outbreak of the subprime crisis. The author tries to clarify it and give professional opinions. Secondly, the author suggests that based on systematic risk prevention, China should develop ETDs market first and then start to develop OTCs market when it is the time.