Jiacheng Shi, Yongjian Xing

(School of Economics, Guizhou University)

Abstract：

After the subprime mortgage crisis in the United States, the international financial market reflected on and standardized high-yield, high-risk, and widely potential financial contagion derivative instruments represented by credit default swaps (CDS) and collateralized debt obligations (CDOs), which bet on extreme tail events. Up to now, mainstream commercial banks and government financial institutions in China have been using financial derivatives for operational compliance testing and financial hedging, and appropriate derivative positions have gradually become the main means of risk avoidance in China. Therefore, starting from the background and technical details of derivatives, we will deeply explore their hedging role in large financial institutions, and discover new concepts and inspirations for the use of derivatives and risk management in the post crisis era.

Key Words：

financial risk; derivative hedging; risk management of derivatives; hierarchical design; risk contagion