What do financial derivatives mean in popular terms? For example, it is easy to understand. Financial derivative is a concept corresponding to basic financial products.
At present, the main financial derivatives are: forward contracts, financial futures, options and swaps.
Generally speaking, it is financial instruments other than currency, gold, foreign exchange and securities. Everyone knew this before.
What are "financial products" and "foreign exchange derivatives"? Like what? Financial products include: cash, bills of exchange, stocks, futures, bonds, insurance policies and the targets of the new financial network.
Foreign exchange derivatives include futures, options and forward contracts.
How to understand financial leverage in financial derivatives? Simple example! Simply put, financial leverage is a multiplication symbol. With this tool, the result of investment can be amplified, and whether the final result is profit or loss, it will increase in proportion.
For example, considering that the appreciation profit of real estate is higher than the bank interest, the loan is used for real estate speculation.
For example, in margin trading of futures, paying 200,000 margin can control 2 million orders. The profit and loss are calculated at 2 million.
It's a bit like when the rocket takes off, thousands of miles away.
Therefore, before using this tool, investors must carefully analyze the income expectations and possible risks in investment projects.
When using the tool of financial leverage, the expenditure of cash flow may increase, which must be considered. Otherwise, once the capital chain breaks, even if the final result may be huge gains, it may face the end of early withdrawal.
Illustrate "financial derivatives" with examples and analyze the concepts and characteristics of financial derivatives.
(A) the concept of financial derivatives
Financial derivatives refer to derivative financial products whose prices are determined by the changes of basic products or basic variables.
(B) the basic characteristics of financial derivatives
1, intertemporal transaction
2. Leverage effect
3. Uncertainty and high risk
4. Hedging and speculative arbitrage coexist.
Second, the classification of financial derivatives
(a) according to the type of basic tools:
1, stock derivatives
2. Currency derivatives
3. Interest rate derivatives
(2) According to the characteristics of risk and return:
Symmetric type and asymmetric type
(3) According to the transaction mode and characteristics:
Financial forward contracts, financial futures, financial options and financial swaps.
The role of financial derivatives in the Asian financial crisis
The inherent fragility of the financial system constitutes a necessary condition for financial instability, but it is often exposed under the action of external shocks. Financial derivatives continue to innovate and develop, and international hot money and hedge funds are looking for opportunities to invest and speculate. The attack of hedge funds and international hot money is the external cause of the financial crisis.
From 1996, the Thai baht began to falter. Due to excessive speculation in the real estate industry, many financial institutions are in danger of bankruptcy. Thailand's real estate and stock prices began to plummet, and the economic fundamentals deteriorated rapidly, which increased the market's concern about whether the pegged exchange rate system could be maintained. Thailand has almost no restrictions on the exit of Thai baht, and the negligence of Bangkok International Bank facilities has also provided convenience for speculators, while Thai baht accounts opened by non-residents in Thailand are basically in a laissez-faire state. 1997 65438+1At the end of October and the beginning of February, the Thai baht was affected again. 1 On March 4, 1997, the Central Bank of Thailand announced that there were problems in the asset quality of nine domestic finance companies and1housing loan companies, and their capital was insufficient. They demanded to increase capital, raise the bad debt reserve ratio from 100% to 1 15%-L20%, and ordered the financial system to make preparations in the next two years. Although the original intention of the Bank of Thailand is to stabilize the financial market and enhance people's confidence. However, the result has had a negative impact. People are worried that the introduction of this measure by the central bank will make the capital turnover of financial companies and financial institutions more difficult. Investors speculate that there may be a harbinger of deeper problems in Thailand's financial system, which will lead to a run-on trend and sharp fluctuations in the stock market price.
Hedge funds must first hoard a large number of Thai baht for sale if they want to launch a sniper war against Thai baht. Therefore, fund managers of hedge funds must secretly buy and hoard a large amount of Thai baht. The main sources of Thai baht hoarding are: loans from local banks; Financing from offshore financial markets; Sale of local assets; Borrow shares from local stock custodians and sell them short in exchange for Thai baht. Due to the backward currency monitoring system of the Central Bank of Thailand, Thailand * * * can't keep abreast of the abnormal phenomena in Thai baht trading. In addition to buying Thai baht, hedge funds also lend a lot of Thai baht, including some low-leverage forward contracts, through the overseas financial markets of the Bank of Thailand, branches of Bangkok International Bank and non-resident accounts in Thailand. Thai baht constitutes a sharp weapon for hedge funds to launch sniper attacks from the above aspects. After accumulating a large amount of Thai baht, they quickly sold it to the foreign exchange spot market at a high price and bought dollars. In the case of insufficient information and lack of understanding, it is difficult for investors to make reasonable expectations for the uncertainty of the market in the future. They often extract information by observing the behavior of people around them. In the continuous transmission of this kind of information, many people's information will be roughly the same and reinforce each other, resulting in herd behavior, the so-called "herd effect." Herd effect is a nonlinear mechanism that individual rational behavior leads to collective irrational behavior. Due to the "herd effect", Thai enterprises, foreign-funded institutions and small and medium-sized investors will follow suit. In addition, hedge funds are throwing Thai baht in Thailand's domestic market and offshore market through spot trading and forward trading, and the Thai baht is bound to depreciate sharply. After the attack is effective and the Thai baht market exchange rate drops sharply, the hedge fund will buy Thai baht at a low price in foreign currencies such as US dollars to repay the loan, and the buyer's stock will be returned to the stock custodian. In the economic downturn, this avalanche selling triggered market panic, which led many small and medium-sized retail investors to join the selling ranks, which aggravated the sharp downward fluctuation of the Thai baht exchange rate.
By the end of 1993, the daily trading volume of options and futures in Thailand's financial market reached US$ 600 million. With the development of communication and information technology, financial derivatives in Thailand have developed rapidly. By the end of 1996, Thailand's financial market had traded a variety of financial derivatives, including currency options, currency futures, government bond options, government bond futures and interest rate options, with a daily trading volume of US$ 2 billion. To some extent, it provides market conditions for hedge funds to use financial derivatives trading to carry out sniper warfare in Thailand.
Another strategy for hedge funds to launch sniper warfare against the Thai baht is to use forward contracts in the forward foreign exchange market to create depreciation pressure on the Thai baht with the help of banks. Hedge funds sign a large number of forward contracts with banks and sell Thai baht. When the bank receives the sold Thai baht forward contract, in order to avoid the exchange rate risk, the bank usually takes hedging measures and immediately sells the spot Thai baht and converts it into US dollars. The change of supply and demand in the money market has caused the pressure of devaluation of Thai baht. After the devaluation of the Thai baht, the fund managers of hedge funds can sign long-term forward contracts with the same maturity date, the same amount and the opposite direction before the short-term forward contracts expire. Or according to short forward contracts, hedge funds use short Thai baht forward contracts, put options and other financial derivatives to obtain the intermediate exchange rate difference.
1997 in may, hedge funds and other international hot money used a large number of short-term monetary funds to arbitrage in Thailand. The Thai baht has been sold short in large quantities, and the Thai baht is under strong depreciation pressure. In order to control the panic outflow of capital and restore the balance of the financial market, the Central Bank of Thailand has taken a number of defensive measures. First, it has implemented capital and foreign exchange controls. The Central Bank of Thailand has thrown out the US dollars in foreign exchange reserves in the foreign exchange market and bought a large number of Thai baht to maintain a fixed exchange rate between the Thai baht and the US dollar. Control of credit supply); To foreign speculators; Second, take interest rate defense, and substantially increase the overnight lending rate (0 over Night Rate). By raising the transaction cost, we can crack down on the financing cost and transaction cost of speculators such as hedge funds, and curb the speculators' attacks, thus curbing the panic selling of domestic assets and speculators' short positions. Third, a large number of interventions in the spot and forward markets to ease the pressure of Thai baht depreciation. However, these emergency measures have had little effect.
The central bank of Thailand used foreign exchange reserves to intervene in the market, which reduced Thailand's foreign exchange reserves from137.7 billion dollars at the end of 1996 to133.3 billion dollars in May 1997. Of the $33.3 billion, $23.4 billion is a forward contract purchased by the Central Bank of Thailand and will be paid in the next 12 months. In fact, Thailand's foreign exchange reserves are less than $654.38+000 billion, and hedge funds and international hot money take advantage of the leverage effect of the foreign exchange forward market and the lag of delivery, forcing the Central Bank of Thailand to implement market intervention.
It is estimated that in the attack of 1997 in May, speculators invested at least170 billion baht, thus creating huge selling pressure. Limited by the foreign exchange reserves of the Bank of Thailand, the foreign exchange reserves of the Bank of Thailand are a drop in the bucket compared with hedge funds and other hot money. The intervention has caused a lot of losses to Thailand's foreign exchange reserves. 1On July 2, 1997, the Thai authorities announced that the Thai baht was forced to abandon the previous fixed exchange rate system of 1984 and adopt a floating exchange rate system of o 1998 1 65438+.
Measures such as raising short-term interest rates and tightening monetary policy have also failed to work. At the same time, the interest rate defense war will overwhelm Thailand's already fragile domestic economy and produce great negative effects. Due to the expected interest rate, rational investors often think that the excessive interest rate level may be a stopgap measure and cannot be maintained for a long time, which makes the credibility of the central bank's policy intervention decline and induces speculative shocks in the stock market and stock index futures. Thai authorities tried to create a "two-tier system" by "dividing" the domestic money market to protect non-speculative credit demand. This makes the offshore market interest rate soar to 1 300% (1 MF, 1998)o However, the huge difference between the domestic interest rate (0n shore interest rate) and the offshore interest rate leads to an endless stream of arbitrage activities. In addition, the rise in interest rates has led to a sharp drop in the stock market, and hedge funds have sold stocks short. Hedge funds can take advantage of rising interest rates to do swap transactions and make profits by speculating in the stock market.
Hedge funds and speculators may convert their profits in the stock market and stock index futures into foreign exchange, further increasing the pressure of Thai baht depreciation. At the same time, after the devaluation of the Thai baht, the fund managers of hedge funds can use the low price to buy back the Thai baht in dollars to repay the Thai baht loan and interest. Morton? Miller specifically opposed the use of measures to raise short-term interest rates and tighten monetary policy, believing that this was the first mistake that the Bank of Thailand could not defend the Thai baht: "Trying to crack down on international speculation by raising interest rates and tightening market liquidity. They take it for granted that this is the most effective way to attract foreign investment (especially the US dollar) and combat international speculative forces. Because speculators usually borrow local currency to sell short, if the interest rate increases, the cost of those speculators will increase. Sometimes the interest rate rises by 1 times or even1times, and it seems that their speculative cost is horribly high. But in fact, as long as the currency depreciates slightly, short sellers will make a lot of money. If the currency depreciates by 50% or even 60%, the profits of short sellers will be more abundant. From this perspective, raising interest rates will not only fail to crack down on speculative forces, but also make short sellers in the forward currency trading market profitable. At the same time, the depreciation caused by interest rate hikes has dealt a greater blow to domestic residents. As the crisis worsened, Thailand had to seek help from the International Monetary Fund. Led by the International Monetary Fund, the World Bank, the Asian Development Bank and seven countries and regions provided emergency loans of $654.38+072 billion, with the proviso that Thailand must implement a series of economic reform plans. The main contents of the economic reform plan include: enriching foreign exchange reserves with medium-term aid loans; Reduce the expenditure of the whole economy (including public and private expenditure) and narrow the current account deficit; Reorganize the financial system and clean up the problem loans and huge debts of the private sector; Implement development policies and introduce and use foreign capital to solve financial problems. "
What are the specific points of financial derivatives? Let me give you an example of investment. Derivatives are also called financial derivatives. Financial derivatives, also known as "financial derivatives", is a concept corresponding to basic financial products, which refers to derivative financial products whose prices change with the price (or value) of basic financial products. The basic product mentioned here is a relative concept, including not only spot financial products (such as bonds, stocks, bank time deposits, etc.). ), including financial derivatives. As the basis of financial derivatives, variables include interest rate, exchange rate, various price indexes, inflation rate and even weather (temperature) index.
Derivative securities are financial instruments derived from traditional financial instruments such as currency, bonds and stocks, which are characterized by leverage and credit transactions. At present, the main financial derivatives are: forward contracts, financial futures, options and swaps. Generally speaking, it is financial instruments other than currency, gold, foreign exchange and securities. Everyone knew this before.
What is embedded financial derivatives 1998? In FASB, the accounting standard 133 "Accounting Standard for Derivatives and Hedging Business" divides financial derivatives into independent derivatives box embedded derivatives.
Embedded derivatives refer to derivatives embedded in non-derivative instruments (i.e. master contracts) so that all or part of the cash flow of hybrid instruments (consisting of derivatives and master contracts) changes with the changes of specific interest rates, financial instrument prices, commodity prices, exchange rates, price indices, interest rate indices, credit ratings, credit indices or other similar variables.
What book are you reading?
The difference between options, forwards and futures in financial derivatives: options. The right holder has the right to purchase the underlying assets at a specific time and at a specific price. The underlying assets are all contracts (that is, contracts), and no physical delivery is made. Generally can be divided into call options and put options. In a call option, the right holder is the buyer (long position), and in a put option, the right holder is the seller (short position). The obligee has the right to choose whether to buy the contract according to his own interests, while the other party has only the obligation to sell or buy. The right holder has to pay the price for this right, which is the option premium (in layman's terms, the deposit). If the right holder waives the right to buy or sell the contract, then the option metal belongs to the other party. On-exchange trading, that is, exchange. The two sides of the transaction don't know each other and don't meet!
Forward: forward. Forward is equivalent to our order, physical delivery, and both parties have the right to choose whether to trade, both of which are over-the-counter transactions. Personally, I think its nature can be regarded as "face to face, cash on delivery". But it should be noted that there is no need to pay a "deposit" when signing a contract!
Futures: Futures. Futures and forwards are similar. The main difference is that futures are traded on the floor. The exchange classifies the targets and specifies the size, quantity and price of the targets. Its liquidation method is once a day, which is the mark-to-market behavior. For people who speculate on futures, they usually sell the contract before it expires to avoid physical delivery. This is called liquidation. The delivery date of futures is the whole month. It should be noted that the time and place of delivery are decided by the seller, not the buyer.
I remember a case, which seems to be a bank in Paris. One of its employees bought the futures contract of cattle, but did not close the position when it expired, which eventually led to physical delivery. The bank has to go to great lengths to deal with these cows! This is a classic case of futures!
I hope you can understand my explanation! You can also refer to John Hull's book Options, Futures and Their Derivatives, which is quite classic!