Study On The Application Of Fair Value In Financial Derivatives

Since 1970's, with the waves of the worldwide financial innovation, financial derivatives developed swiftly and nowadays they gradually played very active and important roles in the economic field. There has happened deep changes in international financial market and the market-dominated innovation of financial derivatives also arose continuously. The rising and development of financial derivatives brought traditional financial accounting great challenges. It made some theories and methods in traditional financial accounting be reviewed and reformed and it also gave rise to many problems on the theories and practices of financial derivatives accounting. The accounting measurement of financial derivatives was one of these problems which need to be settled as soon as possible.Because financial derivatives are derivative and they have leverage and high risks, the traditional accounting measurement models can not match their measurement needs. Thus, the concept of fair value came up at the time. Through the long-term study and consistent development in accounting field, fair value has been considered as the only model which is related to financial derivatives and it was applied widely in the accounting practices.Therefore, considering the foreign and domestic situation at present, there are lots of extremely hard problems in the application of fair value. These problems become more serious and obvious in the worldwide financial crisis. As a result, how to use fair value scientifically and reasonably in the measurement of financial derivatives becomes an important problem which should be resolved as soon as possible. The study on the problem has very important practical significance to exploring the law of accounting development, perfecting accounting theories and promoting the growth of accounting and other related subjects.This article conducted an overview of fair value and financial derivatives at first, and then combined with the foreign and domestic situation, it discussed the appearance at present and problems in the application of fair value to measuring financial derivatives. At the same time, it analyzed the role that the using of fair value in the measurement of financial derivatives can aggravate the financial crisis. Finally, it gave some suggestions to how to use fair value more scientifically and reasonably in the measurement of financial derivatives.