The micro-main reasons of financial derivatives risk are weak internal control and lack of effective supervision over traders, which are important reasons for financial derivatives risk. For example, the extreme confusion of internal risk management is the main reason for the collapse of Bahrain Bank. First of all, Bahrain Bank lacks a basic risk prevention mechanism. Allison has both liquidation duties and trading duties, and lacks checks and balances. It is easy to cover up risks or losses by rewriting transaction records. At the same time, Bahrain Bank also lacks an independent risk control and inspection department to supervise Lisen's actions; Secondly, the management of Bahrain Bank is lax in supervision and weak in risk awareness. After the Kansai earthquake in Japan, when Allison turned to the head office for help because of the insufficient margin for its derivative contracts, the head office even allocated hundreds of millions of dollars to the Singapore branch to provide unlimited financial support. Moreover, the leadership of Bahrain Bank was divided and the internal business ties were tense, which made many informed managers ignore the repeated warnings issued by market participants and internal audit teams, and eventually led to the collapse of the entire Bahrain Group.

In addition, excessive incentive mechanism stimulates the risk-taking spirit of traders and increases the risk coefficient in the trading process.

Macro-causes of financial derivatives risk

Poor financial supervision is another main reason for the risk of financial derivatives. An important reason for the collapse of Bahrain Bank is that the financial supervision authorities in Britain and Singapore failed to supervise in advance or did not cooperate with each other. The problems of the British regulatory authorities are as follows: First, the department in charge of supervising investment banks such as Bahrain gave oral relief, and Bahrain did not need to consult the Bank of England when remitting huge sums of money from Nikkei. Second, the Bank of England allows the internal banks of Bahrain Group to give unlimited financial support to the securities sector. The problems existing in Singapore's financial supervision authorities are as follows: First, in order to promote the business development, Singapore International Financial Exchange controls the positions too loosely, does not strictly enforce the upper limit of positions, allows a single trading account to accumulate a large number of Nikkei index and Japanese debt futures positions, and fails to timely supervise the number of contracts that member companies can hold and the payment of deposits. Secondly, Allison frequently engages in reverse trading, and the transaction amount is particularly huge, but it has not attracted the attention of the exchange. If the Bank of England, Singapore and Osaka exchanges can strengthen communication, enjoy sufficient information and discover the huge positions held by Bahrain Bank in the two exchanges in time, perhaps Bahrain Bank will not go bankrupt.

Long-term Capital Management Company (LTCM) was once the largest hedge fund in the United States, but it staged the biggest financial waterloo in Russian history. The existence of regulatory vacuum is the institutional reason for its huge losses. Even after the LTCM accident, the financial authorities in the United States are still unclear about its assets and liabilities. Due to the government's deregulation of banks and securities institutions, many international commercial banking groups and securities institutions provided them with unlimited financing, and Swiss Bank (UBS) and Italian Foreign Exchange Administration (UIC) lost 765.438 billion US dollars and 250 million US dollars respectively.

In addition, the "327 Treasury Bond" futures turmoil in China is caused by excessive speculation and insufficient regulatory capacity, in addition to weak market demand and insufficient conditions for developing derivatives.