A brief introduction to the main functions of financial derivatives is as follows:

The main functions of financial derivatives (also known as "financial derivatives") are risk aversion, price discovery, and hedging. A great way to risk your assets.

Note: Everything has a good side and a bad side. Risk aversion must be borne by someone. The high leverage of derivatives is to transfer huge risks to those who are willing to bear them. Traders can be divided into three categories: hedgers, speculators, and arbitrageurs.

Hedgers use derivatives contracts to reduce their exposure to risks arising from market changes. Speculators use these products to place bets on the future direction of market variables. Arbitrageurs use two or more offsetting trades to lock in profits. These three types of traders simultaneously maintain the above-mentioned functions of the financial derivatives market.

Improper trading of financial derivatives will lead to huge risks, some of which are even catastrophic. Foreign ones include the Barings Bank incident, the Procter & Gamble incident, the LTCM incident, Bankers Trust, and the domestic State Reserve Copper incident. , the China National Aviation Oil Incident.

Extended information:

Common tools:

1. Futures contracts. Futures contracts refer to standardized contracts formulated by futures exchanges that stipulate the delivery of a certain quantity and quality of physical commodities or financial commodities at a specific time and place in the future.

2. Options contract. An option contract refers to an option contract that can be obtained by the buyer of the contract after paying a certain amount of money. Warrants launched in the securities market are call options, while put warrants are put options.

3. Forward contract. A forward contract refers to a contract in which the two parties agree that the buyer will purchase a certain quantity of the subject item from the seller at an agreed value on a certain date in the future.

4. Exchange contract. A swap contract refers to a contract in which the two parties exchange a series of cash flows within a certain period in the future. Depending on the subject matter of the contract, swaps can be divided into interest rate swaps, currency swaps, commodity swaps, equity swaps, etc. Among them, interest rate swaps and currency swaps are relatively common.