Research On The Development Model Of Chinese Financial Derivatives Market

The world economy has showed a trend of financialization,liberalization and integration since the collapse of the Bretton Woods system in the early 1970 s.On the one hand,with the liberalization of financial markets in some countries,further exacerbates the risks of global financial markets.On the other hand,violent fluctuation in financial instrument price makes it impossible for the global capital market and financial institutions to rely solely on the traditional financial business to mitigate risks.A lot of financial institutions urgently need new financial instruments to mitigate risks.China's financial derivative market began to emerge in the 1990 s.It is a late-starting market,so it has its own late-starting advantage.With the deepening of reform and opening-up,China has met the requirements for the development of financial derivative market.After China's accession to the WTO,it needs to better adapt to the global financial innovation environment,maintain its economic security in an more efficient way,improve its financial market system,so it needs to speed up the development of financial derivative market,the development of China's financial derivatives market has been beyond doubt.This paper mainly studies the development model of China's financial derivatives market.Firstly,the article introduces the basic theory of the financial derivatives market and summarizes the development model of the major international financial derivatives market.Then,this paper reviews the development history of China's financial derivatives market,and points out the problems existing in the development model of China's financial derivatives market.At last,this paper put forward the development model of financial derivatives market which is in line with the characteristics of our country,it is development of mixed mode of government and market type.Financial derivatives have four notable features,including inter-temporal,leveraged,linkage and uncertainty features.Financial derivatives have the following three functions,including hedging function,risk aversion function and asset allocation function.The reasons for the rapid development of financial derivative market are as follows:firstly,world economic growth;secondly,promotion by four core pricing theory;thirdly,increase in the needs for risk avoidance caused by the changes in the world economic environment;fourthly,the development of information technology;fifthly,financial deregulation.According to present situation,there are four significant development trends in international financialderivative market:firstly,the increasing centralize of trading centers and unbalanced development trend in financial derivative market;secondly,the development of financial derivative markets in some emerging countries and regions catch up from behind and especially the financial derivative markets shows rapid development in Asia;thirdly,futures products show a trend of financialization and the development of derivatives related to interest rate and stock index is unstoppable;fourthly,various exchanges have transformed from membership system to corporate system.The development pattern of financial derivative market includes the institutional change and the path choice.This paper takes the development pattern in the United States and the United Kingdom as an example to introduce the development path of induced market-driven financial derivative market and takes the development pattern in South Korea and Singapore as an example to introduce the development path of mandatory government-led financial derivative market.Moreover,it also makes a comparison and analysis of the two different patterns.Comparing development of China's financial derivative market(start-up stage,reorganization stage and steady development stage)with that of mature markets in the Western countries,China's financial derivative market has obvious characteristics in its development,which is leaping development with late-starting advantages.As for development path,China's financial derivative market starts with foreign exchange futures and then adds treasury bond futures,stock index futures and bond-related derivatives;before 2000,China's financial derivative market was featured by induced institutional change characteristic;after 2000,it changes to mandatory institutional change characteristic.In the initial stage of China's financial derivative market,immature market conditions,backward regulation and supervision,excessive speculation and other problems lead to the closure of trading pilots.China's financial derivative market ended in failure in the initial stage,for it copied the development patterns of developed countries in Europe and the United States.Therefore,it is not advisable to copy the induced institutional change development pattern of the European countries and the United States,or imitate the mandatory institutional change development pattern represented by South Korea and Singapore.It is necessary to choose a development pattern suitable for China's own conditions,namely development pattern mixing with government-led and market-driven characteristics.Depended on China's conditions,relevant government departments should actively promote the development of supporting financial products and environment,improve market supervision system,cultivate market participants andpromote the development of China's financial derivative market in a sustained and stable manner.