The Path Analysis On Financial Product Innovation

People have been aware of the decisive function of technical progress in economic growth. Adam smith regarded the invention and improvements of the machine as the main way that division of labor promotes productivity raise. In Maxell's earlier period theories, the technique and the technique progresses are one of the main powers that rises the function to the whole society. But Schumpeter's thought concerning the technique innovation affecting the economic period has brought about profound influence on the development of the modern industry economics. A great deal of literature analysis has been the witness creative activity of the industry field (industrial circles). However, in the aspect of contacting the industry economics literature result with the creative activity of financial system seldom make out. Compared with the creative detailed research of technique in the industry economics literature, the research of financial innovation especially financial product innovation is placed in the start stage, usually staying the description level related with the actual situation and operation, and the theories are also in the thesis that have relation with finance innovation sporadically. Owing to this, one of the paper's writing purposes is to study the theories of financial product innovation under the frame of essential economics in the round, and make an all new explain of the path of financial product innovation from the angle of the division of labor.It is the theories sills of analyzing the path of financial product innovation to comprehend financial product or instruments as a kind of contract, a kind of agreement of document with financial rules or the relation certificate. From this definition, all combinations of the rights and duties collocated by the time and space will produce the variousfinancial contracts (lately financial product or instruments), all the bargain behaviors encircled with finance must be approached by trading these finances contract. Therefore, so-called financial product innovation is also the innovation of the finance contract, is a kind of new bundling and unbundling of the main factors of the rights and duties in the contracts. In the next writing, the author regards the basic function of the financial system as collocations of the time and space in the environment of the indetermination, and investigates the financial products in the environment of market trading.Because the emergence of any financial product is end to carry out a certain bargain in the market. The financial product innovation said up from this meaning can be thought about a rare result inside the market trading, not be expected" an empty hole invites the wind", its emergence will promote the efficiency that the market collocates the resources doubtless.On the other hand, to be the main body of financial product innovation, be to the foundation arrangement of the process of transferring the save to the investment, the financial intermediation's existence and development trend decide the path and direction of financial product innovation. The traditional financial intermediation theories try to use the proper blemish within market to explain the rationality of financial intermediation's existence, for example the information dissymmetry makes financial intermediation play to act for a supervisor's role, and the existence of transaction costs also makes financial intermediations be engaged in the manufacture of financial products. But the traditional theories imply an importance inference, namely: While the transaction costs descend continuously, financial intermediations should tend to perish and be replaced by modern financial market. However, the fact is that financial intermediations not only existbut also occupy the predominant position on almost all financial markets. But their mode and means of production and making a living is in change, this kind of changes body their behaviors of large-scale market participation and risk management. This article tries to use financial intermediations' comparison advantages in dynamic trade and that of participating the market division of labor to explain this phenomenon. We think financial intermediations are independent and worthy economic body and investigate their function and development trend from the reciprocal relationship between intermediations and market in a dynamic state of frame, thus can make the helix of financial product innovation rise and be continued. Among that, the author absorbs the research result of information economics, contractual economics and division of labors and adopts the methods of the function analysis to explain the real reason of financial intermediations' existence and their push to financial product innovation.The third, to lack the research that contacts the industry economics literature with financial innovation activities is because of the individuality of the financial industry. Such as, the lack of patent protects, the lesser capital devotion, compared with the industry field, these products' development time is shorter and the investment is deferrable. Though the financial product innovation has its special one side, the industry economics literature still can provide a great deal of of applied research result in finance study field. Some assumptions within these studies can be used in the financial market, though need to be explained in some substitute. Therefore, this paper puts the angle of view on the innovation process of the financial product and its diffuse, then analyzes and adjudicates the financial product innovations' fist-mover advantages models and other innovation diffuse models in detail, the purpose of thatis to indicate the financial angle of view of product innovation is also a dynamic process of development, adoption and diffuseness, among them, the competitors are interactive, this characteristic works with decisive influence on the innovation process of the financial product.The fourth, whither the diagnosis, identification, measures of the financial risk and the decision of the risk condition diagrams or the calculation of an internal rate of return and all inside cost all come down to the analysis of cash flow and the decision of assets value. So, the theories and methods of pricing of assets become the core contents of the worth theories and the whole financial engineering activities, especially the theories and methods of pricing for those options whose income matrixes have very strong complicated characteristic of non linearity. Also is to say, having no scientific theories and methods of pricing of assets, all activities with financial product innovation will be outshone and all impossibly get the valid realization. From this consideration, this article commences from the technique strategy of financial engineering, summarizes the theories and methods of pricing of assets in details and makes a comparative analysis for the three kinds of different number-analysis methods.Finally, in order to realize the integrate of the norm analysis and the substantial evidence analysis, the author studied the problems of Chinese financial product innovation, analyzed the condition of Chinese financial product innovation in the round and pointed out the unavailability and the low completed of Chinese financial market, used the index of financial related rate reflecting some country's finance development degree to evaluate the degree of Chinese financial product innovation and found the straight line rise of our country's index of financial related rate is not the embodiment of the abundance of Chinese financial instruments butoppression. In the economic structure of a division of labor, the financial product innovation is one of the most valid methods that people overcomes the transaction cost and alleviates the oppression of transaction risk. So, the lag of financial product innovation will do damage to the development of the market economy. Relaxing the financial constrains, establishing the market rules that takes trustworthiness as the origin, thus constructing the system environment of encouraging financial product innovation is more important, compared with the innovation from technique level ( for example, importing some mature financial product of international market). In order to indicate the system shortcoming and constrains imposed on financial product innovation, this article gives the substantial evidence analysis of convertible bond which is the most influential investment species in current market.