From the Subprime Mortgage Crisis to Ant Financial, on How Financial Derivatives “Transfer” Risks

Abstract

As Chinese financial innovation continues to enter the deep-water area, the management and control of financial derivatives instruments and the strengthening of financial supervision are the foundation to ensure the stability of Chinese financial capital market. Financial innovation or financial technology may accelerate the efficiency and loss in the financial process, but it could not change the most fundamental supply-demand relationship, creditor-rights relationship, financial cycle and other conditions in the financial market. When financial institutions consider using financial derivatives as a tool to expand their income scale, they need to fully consider leverage risk, social systemic risk, and regulatory flaws. From the subprime mortgage crisis to Ant Financial, the advantages and disadvantages, benefits and risks of financial derivatives need to be taken seriously by every participant in the chain.