What are financial derivatives? How to evaluate the function of financial derivatives?

Derivatives are also called financial derivatives. Financial derivatives, also known as "financial derivatives", is a concept corresponding to basic financial products, which refers to derivative financial products whose prices change with the price (or value) of basic financial products. The basic product mentioned here is a relative concept, including not only spot financial products (such as bonds, stocks, bank time deposits, etc.). ), including financial derivatives. As the basis of financial derivatives, variables include interest rate, exchange rate, various price indexes and even weather (temperature) index. 1.70s' high inflation rate and ubiquitous floating exchange rate system made it an important demand for financial transactions to avoid inflation risk, interest rate risk and exchange rate risk. Derivatives can effectively transfer the risks that some investors are unwilling to bear to those who are willing to bear. 2. The gradual relaxation of financial control by governments and the progress of communication technology and information processing technology have promoted the rapid development of derivatives. The emergence of advanced technology has greatly reduced the cost of implementing risk management strategies such as hedging and arbitrage, thus greatly increasing the supply of derivatives. 3. The increasing competition in the financial industry has prompted financial institutions to constantly carry out financial innovation and introduce new financial derivatives. 4. Since 1970s, the valuation models and technologies of derivatives, such as option pricing model, have made breakthrough progress, which is conducive to investors' more accurate valuation and risk management of derivatives, as well as the issuance and use of derivatives, thus promoting the normal development of derivatives.