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Analysis of Systemic Financial Risk Based On Financial Derivatives

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DOI: 10.38007/Proceedings.0001546

Author(s)

Pengfei Guo

Corresponding Author

Pengfei Guo

Abstract

The financial crisis triggered by the subprime crisis in 2008 has made global financial markets frustrated, and it is necessary to examine the relationship between financial derivatives and systemic risks. This article uses financial derivatives as an entry point of view to analyze the role of financial derivatives in triggering systemic risks. Through research, it is found that financial derivatives are the key factors causing financial market volatility due to their structural complexity and leverage. And asset securitization and margin leverage have caused a downward spiral in asset prices, which in turn causes the expansion and spread of risks, forming systemic risks. For this reason, the article proposes to unify the supervision of financial institutions, improve the risk warning mechanism, and limit the scope of government regulation to prevent systemic risks.

Keywords

Program financial Derivatives; Systemic Risk; Asset Securitization; Margin Leverage; Downward Spiral