What do financial derivatives mean? Financial derivatives are a kind of financial instruments, which are derived from traditional financial products and then used as trading objects. Financial derivatives have no value in themselves. Let's take a look at what financial derivatives mean.
What do financial derivatives mean? 1 What are derivatives?
Derivative is a kind of financial instrument, which is generally manifested as an agreement between two subjects, and its price is determined by the prices of other basic products. And there are corresponding spot assets as the subject matter, which need not be delivered immediately when the transaction is completed and can be delivered at some time in the future. Typical derivatives include forwards, futures, options and swaps.
Financial derivatives, also known as financial derivatives, are financial instruments derived from original financial instruments (stocks, bonds, certificates of deposit, currencies, etc.). ), and their value depends on the underlying assets. Financial derivatives are formally represented as a series of contracts, which stipulate the transaction type, price, quantity, delivery time and place.
future
The analysis techniques of China futures industry mostly copy those of the stock market, such as wave theory, Gann theory, entanglement theory and Dow theory. These theories may be feasible in the stock market, but they are far-fetched in the futures market.
Because there are several important differences between futures and stocks in China.
First, stocks only have a long-term mechanism, and futures are a two-way mechanism, which directly leads to huge differences in the direction of main operations;
Second, the stock market is T+ 1 and the futures market is T+0, which makes the futures market and the stock market have different flexibility in hedging and profitability;
Third, different positions, changeable futures market and relatively fixed stock market directly affect the different controllability of the market.
The above three points are the important reasons why using stock technology to guide futures trading always leads to more losses and less gains. So, what technology can better guide futures trading? After years of experience accumulation, the futures "futures front line" can be better applied to futures trading by combining the moving average theory with the reverse theory.
After the fusion of these two theories, a simple and reliable one-line method is formed. The winning rate can reach 60%, the risk is effectively controlled and the profit is greatly enlarged. The theoretical basis of the first-line method is that futures prices always fluctuate around the moving average.
contractual
The transaction of financial derivatives deals with the rights and obligations of basic instruments under certain conditions in the future. From the legal point of view, it is a contract, and financial derivatives are an economic contractual relationship based on highly developed social credit.
financial derivatives
Financial derivatives refer to contracts whose value depends on changes in the underlying assets. This kind of contract can be standardized or non-standardized.
Standardized contracts mean that the transaction price, transaction time, asset characteristics and transaction methods of the subject matter (basic assets) are standardized in advance, so most of these contracts are listed and traded on exchanges, such as futures. Non-standardized contract means that the above matters are agreed by both parties to the transaction, so it has strong flexibility, such as forward agreement.
Financial derivatives are financial-related derivatives, which usually refer to financial instruments derived from basic assets.
Its * * * is characterized by margin trading, that is, as long as a certain percentage of margin is paid, the full amount can be traded without actual principal transfer, and the contract is generally settled by cash difference. Only contracts performed by physical delivery on the due date require the buyer to pay all the loans.
Therefore, financial derivatives trading has leverage effect. The lower the margin, the greater the leverage effect and the greater the risk.
Types of financial derivatives
There are many kinds of financial derivatives in the world, and more and more things belong to this category because of the continuous introduction of new varieties in financial innovation activities. Judging from the basic classification, there are mainly the following three categories:
(1) According to the product form, financial derivatives can be divided into four categories: forward, futures, options and swaps.
(2) According to the classification of first-class assets, financial derivatives are stocks, interest rates, exchange rates and commodities.
If subdivided, stock categories include specific stocks (stock futures, stock option contracts) and stock index futures and option contracts formed by stock combinations.
Interest rates can be divided into short-term interest rates represented by short-term deposit rates (such as interest rate futures, interest rate forwards, interest rate options and interest rate swap contracts) and long-term interest rates represented by long-term bond rates (such as bond futures and bond option contracts); Currency categories include the ratio between different currencies; Commodities include all kinds of bulk physical commodities.
(3) According to the transaction mode, financial derivatives can be divided into OTC and OTC transactions. On-the-spot trading is usually called exchange trading, which refers to the trading mode in which all the supply and demand sides concentrate on the exchange for bidding trading.
OTC means that both parties directly become counterparties, and their participants are limited to customers with high credit.
What is the meaning of financial derivatives? 2 Financial derivatives trading
Financial derivatives refer to contracts whose value depends on the changes in the value of the underlying assets. This kind of contract can be standardized or non-standardized.
definition
Standardized contracts are standardized in advance, so most molecular contracts are listed and traded on exchanges, such as futures. Non-standardized contracts mean that the above items are agreed by both parties to the transaction, so they have strong flexibility, such as forward contracts.
There are many kinds of financial derivatives in the world, and countries have launched financial derivatives in active financial innovation activities. In the world, three kinds of financial derivatives trading: stock index futures, interest rate futures, exchange rate futures and corresponding options trading have become very popular. In China, stock index futures and treasury bond futures have been launched.
classify
Financial derivatives trading can be divided into on-site trading and off-site trading.
1, floor trading
Refers to the trading mode in which all the supply and demand sides concentrate on the exchange for bidding transactions. The characteristic of this trading method is that the exchange collects the deposit from the trading participants, and is also responsible for liquidation and performance guarantee.
In addition, due to the different needs of each investor, the exchange designs standardized financial contracts in advance, and investors choose the contracts and quantities closest to their own needs for trading.
All traders concentrate on trading in one place, which increases the density of trading. Generally, high-liquidity market futures trading and some standardized option contract trading belong to this trading mode. It can be seen that the management of the on-site derivatives trading market is stricter, which is an important cornerstone for the steady development of the derivatives market.
2. OTC trading
Also known as over-the-counter trading, it refers to the trading mode in which both parties directly become counterparties. There are many forms of this transaction, and products with different contents can be designed according to the different needs of each user. At the same time, in order to meet the specific requirements of customers, financial institutions selling derivatives need to have superb financial technology and risk management capabilities.
Over-the-counter transactions constantly produce financial innovations. However, because the liquidation of each transaction is carried out by both parties, the participants in the transaction are limited to customers with high credit.
Swaps and forwards are representative derivatives of OTC transactions. Relatively speaking, the over-the-counter derivatives market is more difficult to supervise and has higher requirements for participants.
trait
Financial derivatives trading presents different characteristics from basic commodities, which can be summarized as follows:
1, financial derivatives trading is the basic tool for the possible future results of current transactions. The outcome of the transaction can only be determined in the future.
2. The object of financial derivatives trading is not the basic tools, but the rights and obligations to deal with these basic tools under certain conditions in the future. These rights and obligations exist in the form of contracts, which constitute the so-called products.
3. Financial derivatives trading is a future transaction. According to the accrual basis financial accounting rules, the balance sheets of both parties to the transaction do not reflect such transactions before the transaction results occur. Therefore, the potential gains and losses cannot be reflected in the financial statements.
4. Financial derivatives trading is a substitute for cash operation. If there is enough cash, the economic function of any derivative can be realized by cash transaction.
5. Since the financial derivatives transaction does not involve the principal, from the perspective of the hedger, the credit risk is reduced.
6. Financial derivatives trading can get the result that the spot market needs more money with less cost, so it is highly leveraged.
7. The same feature of financial derivatives trading is margin trading, that is, as long as a certain percentage of margin is paid, it can be traded in full without actual principal transfer. Contract settlement is generally carried out by cash price difference settlement, and only contracts performed by physical delivery on the due date require the buyer to pay the full amount.
Therefore, financial derivatives trading has leverage effect. The lower the margin, the greater the effect and the greater the risk.
Generally speaking, financial derivatives trading has the characteristics of complexity, high leverage, virtuality and high risk.