Financial derivatives: Financial derivatives with their own value derived from native financial instruments. There are forward contracts, futures, options, etc. . . Its functions include hedging, risk avoidance, speculation, etc.

Most of its forms are transactions in which both parties agree to buy and sell a specific quantity and quality of assets at a specific time in the future at a specific price. .

The U.S. subprime mortgage crisis simply means: The U.S. mortgage capital chain is broken. A large number of borrowers have cut off their mortgage loans due to the decline of the U.S. housing market and declining economic capabilities. Borrower banks and financial institutions cannot receive housing interest, and funds and a large number of buildings with no payment can flow out, resulting in bad debts and bad debts. This affects the entire U.S. financial system. Caused the financial tsunami caused by subprime mortgages.

If we want to talk about the relationship, subprime mortgages are among the original financial products. However, these investment banks and financial institutions in the United States have derived these mortgage assets into high-risk and high-leverage products such as CDS contracts. Financial derivatives to earn high profits. If the U.S. housing market keeps rising, then everything will be fine. Financial institutions continue to take high risks and earn huge profits by holding these mortgage assets. Once the property market drops. You must fully bear the losses caused by the risk. So their relationship is simply financial derivatives. It is highly profitable and highly leveraged. But it also comes with high risks. Just because financial institutions ignore risks and engage in financial derivatives and financial innovation. Only then will we bear the disastrous outcome of the U.S. subprime mortgage crisis.