Study Of The Risk Management Of Financial Derivatives In Commercial Bank In China

Since 1990s, the scale of global financial derivative markets continued to expand, with an increasing number of tradable products and more innovative designs. While there occurred a number of cases which is renowned by their great losses in global financial derivative markets, such as the bankruptcy of Baring Bank. Financial derivative markets have become an important research subject in financial field. The financial derivative products are just on the beginning steps in the commercial banks in China, and the systematic research on the risk management of these products is still deficient. The extent of the financial derivative products development and the level of the risk management take important part in improving the commercial bank's competence.Based on the definition, background, characteristics and classification of the financial derivatives, this paper analyzes the characteristics and reasons of the risk of financial derivatives. The risk of financial derivatives can be classified into credit risk, market risk, liquidity risk, operation risk and law risk, and this paper discusses the causes of the risk of financial derivatives from three aspects: the characteristics of the financial derivatives itself, the macroeconomics and the microeconomics mechanism.By the comparative analyzing method, this paper finds the main problems in the financial derivatives' risk management in the commercial banks, and analyses the reason which causes the problem from management organization structure, law system and enforcement system. By the advanced risk management theory and method, this paper tries to introduce them into the commercial banks in China, and propose advice to strengthen the risk management of financial derivatives in Chinese commercial banks, such as the organization reform, choosing the suitable risk measurement models and completing the supervisory system construction.