Derivative Financial Instruments Problem 30

1. The difference between derivative financial instruments and non-derivative financial instruments is that derivatives depend on the changes of another financial instrument.

2. According to the definition of financial instruments: financial instruments are divided into basic financial instruments (non-derivatives) and derivatives. Non-derivatives are basic financial instruments.

For example, derivatives such as hailstones, bonds, cash, and accounts receivable are instruments that are composed of or derived from another financial instrument (including derivatives and non-derivatives). Derivatives can also be the elements that make up derivatives, so derivatives can be very complex.

3. The main difference with non-derivative financial products is that non-derivative financial products refer to basic financial instruments, such as accounts receivable, bills, bonds, etc., which are more traditional financial instruments. Derivative financial instruments are financial instruments derived from the underlying financial instruments, such as **, options, currency swaps, interest rate swaps, etc.

Derivative financial instruments refer to a new type of financial tools derived from traditional financial instruments. Its value depends on the change in the value of the underlying asset. Such contracts can be standardized or non-standardized.

Standardized contracts refer to the trading of the underlying assets, the trading time, the characteristics of the assets, and the trading methods are all standardized in advance, so most of these contracts are listed and traded on the exchange, such as **. A non-standardized contract is one in which the above items are agreed upon by both parties to the transaction, so they have a strong degree of flexibility, such as forward contracts.

In fact, to put it bluntly, derivative financial instruments are things that soften the underlying assets, using the principle of leverage, such as grain and oil**, that is, you and others agree to a certain amount of grain and oil at a certain time in the future, and the price of grain and oil will rise, and you will make money, because although the agreed ** is generally higher than the current market**, but the profit from the price increase will be recovered.

Another example is a forward interest rate agreement, if you have a relationship with a foreign-funded enterprise and the payment needs to be made in foreign currency, but you are worried that the interest rate will change, you can sign a forward interest rate agreement with the bank and pay at the agreed interest rate to avoid risks.

I hope I understand what I said, and if you don't understand, you can still ask me that I am a student in the finance class.

Derivative financial assets are also called financial derivatives, financial derivatives, also known as "financial derivatives".

This is a concept corresponding to the underlying financial product, which refers to a derived financial product that is built on the underlying product or the underlying variable, and its ** changes with the underlying financial product ** (or value).

The underlying products mentioned here are a relative concept, including not only spot financial products (such as bonds, **, bank fixed deposit certificates, etc.), but also financial derivatives. The variables that underpin FDIs include interest rates, exchange rates, indices, inflation rates and even weather (temperature) indices.

Financial derivatives are financial instruments that are derived and derived on the basis of traditional financial instruments such as currencies, bonds, and **, and are characterized by leveraged and credit transactions.

Derivative instruments (FDIs) are created for riskhedge. But this is a prerequisite for this, and that is that you have something on hand that you can physically trade. There are many types of derivatives, including options, forwards, swaps, and combinations of exotic options.

The most fundamental reason for derivatives is risk aversion, and financial liberalization will further promote the development of derivatives.