However, derivatives designated as effective hedging instruments, derivatives belonging to financial guarantee contracts and derivatives linked to equity instruments that are not quoted in an active market and whose fair value cannot be reliably measured and must be settled by delivering equity instruments are excluded, because they cannot be traded at any time.
Extended data
Derivative financial assets came into being in 1970s. Since its appearance, it has developed rapidly. The emergence and rapid development of derivative financial assets are mainly due to the following reasons:
1 and the high inflation rate and ubiquitous floating exchange rate system in 1970s made it an important demand for financial transactions to avoid inflation risk, interest rate risk and exchange rate risk. Derivatives can effectively transfer the risks that some investors are unwilling to bear to those who are willing to bear.
2. The gradual relaxation of financial control by governments and the progress of communication technology and information processing technology have promoted the rapid development of derivatives. The emergence of advanced technology has greatly reduced the cost of implementing risk management strategies such as hedging and arbitrage, thus greatly increasing the supply of derivatives.
3. The increasingly fierce competition in the financial industry has prompted financial institutions to constantly carry out financial innovation and introduce new financial derivatives.
4. Since 1970s, the valuation models and technologies of derivatives, such as option pricing model, have made breakthrough progress, which is helpful for investors to evaluate and manage the risks of derivatives more accurately, and also conducive to the issuance and use of derivatives, thus promoting the normal development of derivatives.
Baidu encyclopedia-derivative financial assets
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