Financial derivatives usually refer to financial instruments derived from basic assets. Because many financial derivatives transactions have no corresponding subjects on the balance sheet, they are also called "off-balance sheet transactions". The same characteristic of financial derivatives is margin trading, that is, as long as a certain proportion of margin is paid, the full amount can be traded without the actual principal transfer, and the contract is generally settled by cash spread. Only contracts performed by physical delivery on the due date require the buyer to pay all the loans.
Financial derivatives are bilateral contracts about traders exchanging cash flows or transferring risks. Common ones are forward contracts, futures, options and swaps. There are many kinds of financial derivatives in the world. At present, the domestic financial derivatives trading mainly refers to the financial business centered on futures. Futures can be divided into commodity futures and financial futures. The latter mainly includes currency futures, interest rate futures and index futures.
1. Forward contract: refers to a contract in which both parties agree to exchange financial assets at a fixed price in the future. The forward contract stipulates the assets to be exchanged in the future, the exchange date, the exchange price and the quantity, and the terms of the contract change according to the needs of both parties. Forward contracts mainly include forward interest rate agreements, forward foreign exchange contracts and forward stock contracts.
2. Financial futures: an agreement reached by buyers and sellers in the form of organized transactions and open bidding to deliver a specific number of financial instruments at a specific time in the future. It mainly includes currency futures, interest rate futures and stock index futures.
3. Financial option: a contract reached by both parties to the contract to buy or sell financial instruments at an agreed price within an agreed date. Including spot options and futures options.
Swaps: refers to financial transactions in which two or more parties exchange a certain amount of money within an agreed time according to the agreed terms, mainly including currency swaps and interest rate swaps.