Macro Effects Of The Financial Derivatives, Systematic Risk

The financial derivative is like a"double-edged sword"for economic development. The financial derivative can not only improve the disposition efficiency of the financial market, but also shift the risk to those who participants in the market, which can promote the stability of the financial system fundamentally. The shift of risk is not the"zero game", but can promote the welfare obviously, bring an advance in economy. However, it may bring the enormous systematic risk to economy. So as to financial derivative which is named"fictitious capital of the fictitious capital", it must develop with real economy in harmony. Real capital determines the development speed of the fictitious capital finally and the fictitious capital acts on the development of real economy instead.This text contains six chapters, analyzing the basic theory of the systematic risk and the main forming reasons of the financial derivative, the conducting effect of the systematic risk and the macroeconomic effect under the open economic condition. Finally, we put forward to the suggestions about the financial derivative.In chapter one, we mainly introduces the theoretical foundation about systematic risk of the financial derivative and the relevant concepts. First of all, we summary the formulation background and characteristic and classification of the financial derivative and introduce three basic functions of arbitrage, finding price, speculating at the hedging. Secondly, the main theory foundation stone about the formulation, development and influenced of the financial derivative have been analyzed. The credit theory is a result of the market development and the important theoretical foundation in the financial market. The setting-up of the credit system has influenced the efficiency of the financial derivative and developing scale directly. The appearance of the fictitious capital has changed the traditional financial management mode, strengthening the difficulty of management. The coordinated development of fictitious economy and real economy can avoid the financial risks. The expectation theory is the important factor to influence the steady of financial market. Finally, we carry on the brief retrospect to the financial risks theory, introducing the risk concept, characteristic and classification existing on the financial market. We carry on the concept to appraise to the systematic risk of financial derivative, and introduce the emerging mechanism briefly.In chapter two, we mainly analyze the systematic risk cause of the financial derivative. The reasons about the systematic risk of the financial derivative are numerous. We mainly explain the systematic risk of financial derivative from the respect of the interest rate, inflation and monetary policy. Interest rate, as the main monetary policy intermediary variable in economic development, has been the tool with which governments in the various countries used to regulating and realizing the economic ultimate goal. However, its frequent change will cause the change of the price of the financial assets and the the capital flows in the world etc., which can bring the change of the price of financial derivative, leading to the immediate risk. The governments of various countries like to adopt Keynes' positive financial policy and deficit policy to stimulate the economic growth, solving the phenomenon of insufficient effective demand. In this way, the governments of various countries will strengthen the currency supply, leading to the taking place of the inflation. The inflation becomes the basic reason of the systematic risk of all previous financial derivatives. So, the governments of various countries are necessary to put the reasonable monetary policies to reduce the times of emergence of the systematic risk.In chapter three, we analyze the conducting of the systematic risk of financial derivative. This chapter mainly analyzes and explains spread route and mechanism of the financial derivative risk from monetary conduction mechanism, behavioral of the main body of market and the exchange rate conduction mechanism. The financial derivative trade concentrates on the financial institution more and more. The positions of these organizations are important and so long as one goes bankrupt because of operating badly, influence will spread the risk to the whole financial system through routes such as the currency, speculator and exchange rate etc., forming the systematic risk."The flocks of sheep effect"of the investor at the market, information asymmetry and finance derive market line competent mechanism etc. make the systematic risk conduct among different financial markets.In chapter four, Effect of enlarging of the systematic risk of financial derivative has been analyzed. The high lever of the financial derivative and high risk, in addition to the imperfect of the financial market, the incomplete of the laws and regulations make the risk of the financial derivative higher and having the expanding effect. This chapter has analyzed the modern derivative--assets securitization at first, it makes the connection between every financial instrument and every market closer and the infection of the risk has the tendency to enlarge. Secondly, we analyze the mechanism of impact on systema- tic risk of financial derivative of capital circulation from international capital circulation. The essence of going after profits and avoiding disadvantages of the capital makes the capital frequently flow on the international financial market. The violent flow of the cap- ital will inevitably bring the fluctuation by a wide margin of the product cost on the cap- ital market. The basic assets price of financial derivative will inevitably fluctuate, bring- ing the enormous risk to financial derivative. And the imbalance of global economic de- velopment, imbalance of international trade, the different directions of the economic pol- icies of various countries and the defect existing in the foreign exchange banking system have caused the necessity taking place in financial risks.In chapter five, we mainly analyze the relation of the efficiency of market of financial derivative and system risk. This chapter has analyzed the mutual facilitation effects between the fictitious economy and the real economy at first. The fictitious economy's function of fixed price, resource distribution make fictitious economy have straight effects on real economy. The financial derivative is regarded as"the fictitious capital of fictitious capital". There are structural efficiency, operational efficiency and dispose efficiency. However, because of the incomplete information, speculation behavior, limitation of the market and limitation of linear normal form, the market does not work which apt to cause the market system risk of financial derivative. Secondly, we have analyzed the governments'behavioral in theory. The trade doctrine of the government has influenced the imbalance between the economic development and financial directly too. In this way, if a country produces the financial derivative risk, it will infect to the other countries and regions. Finally, we analyzed unreasonable behavior of the government and the inefficiency of the hypothesis reality of the effective market that cause the systemic risk in the market of financial derivative.In chapter six, we mainly analyze the precautions against systematic risk of financial derivative from the norms. The prevention against systematic risk of financial derivative has been analyzed. The analysis is from setting up the early warning mechanism of financial derivative separately, security mechanism, accusing of respects such as the mechanism and supervision mechanism etc. Through analyzing, we know that the basic side of the economic, supervision environmental construction, the bettering of the mechanism trade organization, and the setting-up of the precaution give play to the requirement of the advantage of innovative financial instruments effectively. The structure of the financial derivative and the complication of operation require financial institution and regulator reconstruct risk system and set up information announcing system.