The prices of basic financial commodities are mainly expressed in the form of exchange rate and interest rate. Various complex financial commodities in the financial market have become the source of financial risks. All kinds of financial institutions, while innovating financial instruments, have also produced objective requirements to avoid financial risks. In the early 1970s, the collapse of the fixed exchange rate system in the foreign exchange market increased the financial risk unprecedentedly, and directly induced the emergence of financial futures. 1In July 1944, 44 countries held a meeting in Bretton Woods, New Hampshire, USA, and established the Bretton Woods system, which implemented a double-linked fixed exchange rate system, that is, the US dollar was directly linked to gold, and other countries' currencies were linked to the US dollar at a fixed price. The establishment of the Bretton Woods system has played an important role in the economic recovery and growth of post-war western European countries and the development of international trade. At the same time, under the fixed exchange rate system, the exchange rate fluctuation among currencies is limited to a very limited range (1% currency parity), and the foreign exchange risk is almost ignored, so the demand for foreign exchange risk management is naturally small.
Since 1950s, especially after 1960s, with the economic recovery of western European countries, their holdings of US dollars have increased day by day, and their local currencies have also become stronger. However, the United States launched wars against North Korea and Vietnam one after another, resulting in huge trade deficits year after year, deteriorating balance of payments and high inflation, which led to a large outflow of gold and frequent dollar crisis of selling dollars.
In August 197 15, the United States announced the implementation of the "new economic policy" and stopped fulfilling its obligation to exchange dollars for gold. In order to save the near-collapsed fixed exchange rate system, at the end of February of the same year, the G-10 signed the Smithsonian Institution agreement in Washington, USA, announcing that the dollar depreciated by 7.89% against gold, and the fluctuation range of various currencies against the dollar was expanded to 2.25% of the currency parity. 1in February, 973, the United States announced that the dollar would depreciate again 10%. The further depreciation of the dollar failed to stop the continuation of the dollar crisis. Finally, in March 1973, the foreign exchange markets in western Europe and Japan were forced to close 17 days later, major western countries reached an agreement and began to implement a floating exchange rate system.
Under the floating exchange rate system, the exchange rate between currencies directly reflects the imbalance of economic development among countries, which is reflected in the frequent and violent fluctuations of exchange rates between currencies in the international financial market, and the foreign exchange risk increases rapidly compared with that under the fixed exchange rate system. The holders of all kinds of financial commodities are facing the increasingly serious threat of foreign exchange risks, and the demand for avoiding risks is increasingly strong. The market urgently needs a convenient and effective tool to guard against foreign exchange risks. In this context, foreign exchange futures came into being.
1972 in may, the Chicago mercantile exchange established the international money market department and launched the forex futures trading. At that time, foreign exchange futures contracts were all quoted in dollars, and there were seven kinds of currencies, namely, British pound, Canadian dollar, German mark, Japanese yen, Swiss franc, Mexican peso and Italian lira. Later, the exchange adjusted the contract according to market demand, and stopped the trading of Italian lira and Mexican peso successively, and added futures contracts of Dutch guilder, French franc and Australian dollar. Following the successful launch of forex futures trading in the international money market, exchanges in the United States and other countries followed suit and launched their own foreign exchange futures contracts, which greatly enriched the trading varieties of foreign exchange futures and triggered innovations in other financial futures. 1975 10, Chicago futures exchange launched the first interest rate futures contract-gnma mortgage certificate futures trading; 1982, Kansas futures exchange (KCBT) launched the value line composite index futures trading, which marked the initial formation of three types of financial futures. There are dozens of active financial futures contracts in the world's major financial futures markets. According to the nature of various contract targets, financial futures can be divided into three categories: foreign exchange futures, interest rate futures and stock index futures, among which the most influential contract is CBOT's long-term US Treasury bond futures contract. The 90-day European yen futures contract of Tokyo International Financial Futures Exchange (TIFFE) and the Hang Seng Index futures contract of Hong Kong Futures Exchange (HKFE).
Financial futures has only a short history of more than 20 years, far less than commodity futures, but its development speed is much faster than commodity futures. Financial futures trading has become one of the main contents of the financial market. In many important financial markets, the trading volume of financial futures even exceeds the trading volume of its basic financial products. With the development of global financial markets, financial futures are increasingly characterized by internationalization, and the interaction of major global financial futures markets is enhanced and the competition is becoming increasingly fierce. The important function of financial futures trading is to provide a means of hedging. Financial futures trading provides two main types of hedging:
First, sell the hedge.
This kind of hedging, also called short futures hedging, refers to the use of interest rate futures trading to avoid the risk that the future interest rate rise will lead to the decline in the value of bonds held or the increase in the scheduled borrowing cost; Or use forex futures trading to avoid the risk that the value of foreign currency assets held will decrease and the value of foreign exchange income will decrease in the future.
Second, buy hedge (buy hedge)
Also known as forward futures hedging, it refers to the use of interest rate futures trading to avoid the risk that the future interest rate decline will lead to a decrease in the scheduled interest rate of bond investment (the increase in bond purchase price); Or use forex futures trading to avoid the risk of the increase of scheduled foreign exchange payment in local currency caused by the rise of foreign exchange rate in the future (that is, overpaying in local currency).
Third, direct hedging
Refers to the use of the same goods as the spot, which needs to be hedged to avoid risks.
Fourth, mutual hedging (cross hedging)
It means that there is no commodity in the futures market that needs to be preserved as much as the spot, and the commodity with the closest interest rate linkage is used to avoid risks.
Due to the standardization of futures market transactions, it is difficult to fully realize the above functions in practice. So we must pay attention to two risks: First, basicrisk. This is the risk brought by direct hedging and mutual hedging, but the former is less risky and the latter is more risky. Second, yieldcurverisk. This is the risk brought by the inconsistent collection and payment cycle and the change of income curve.
Verb (abbreviation of verb) price discovery function
It refers to the function of forming futures prices through centralized bidding in an open, fair, efficient and competitive futures market. 1. The delivery of financial futures is very convenient.
In futures trading, although the proportion of actual delivery is very small, once delivery is needed, the delivery of ordinary commodity futures is more complicated. In addition to strict regulations on delivery time, delivery place and delivery method, delivery grades should also be strictly divided. The physical inventory and transportation are also very complicated. In contrast, the delivery of financial futures is obviously much easier. Because in financial futures trading, the delivery of stock index futures, European dollar time deposits and other varieties is generally settled in cash, that is, when the futures contract expires, the price difference between the two parties is settled according to the price change. This cash settlement method is naturally simpler than physical delivery. In addition, even if some financial futures (such as foreign exchange futures and various bond futures) need to be delivered in kind, due to the homogeneity of these products, there is basically no transportation cost, and their delivery is much more convenient than ordinary commodity futures.
2. The blind spot of the delivery price of financial futures has been greatly reduced.
In commodity futures, due to the existence of large delivery costs, these delivery costs will bring certain losses to both long and short sides. For example, the delivery price of soybeans is 2000 yuan/ton. Even if this price is consistent with the local spot price at that time, the seller of this price may actually only get 1970 yuan/ton, because transportation, storage, inspection, delivery and other expenses must be deducted. For the buyer, it may actually cost 2020 yuan, plus transportation and delivery fees. 50 yuan, where is the difference between the two is the price blind spot. In financial futures, because there are basically no transportation costs and storage costs, this price blind spot has been greatly reduced. For varieties that use cash delivery, the price blind spot even disappears completely.
3. It is easier to carry out mid-term arbitrage trading of financial futures.
In commodity futures, the arbitrage transactions carried out by speculators are basically concentrated in the form of spread (also known as spread arbitrage). The reason why arbitrage is rarely used is related to high extra cost, poor liquidity and difficulty in spot trading. In financial futures trading, because the financial spot market itself has the characteristics of low additional cost, good liquidity and easy development, it has attracted a number of powerful institutions to specialize in spot arbitrage trading. Arbitrage is prevalent in financial futures, which not only promotes the liquidity of futures trading, but also keeps the difference between futures prices and spot prices within a reasonable range.
4. It is difficult for financial futures to forcibly open positions.
In commodity futures, sometimes there will be forced liquidation. Usually, the performance of forced market is that the futures price differs greatly from the spot price, far beyond the reasonable range, and the futures price does not converge to the spot price at the time of delivery or near delivery. The more serious forced liquidation market is that the manipulator controls both the spot and the futures. It once appeared in the US silver futures of 1980, and there was also a short soybean market in CBOT of 1989. However, in the history of the world financial futures, the forced market has never happened. The forced liquidation of financial futures is difficult to happen because the financial spot market is a huge market, and the bookmakers can't manipulate it; Secondly, because of the existence of strong arbitrage power, they will bury those bookmakers who try to launch a short-selling market; Finally, for some financial futures with cash delivery, the final delivery price of futures contracts is the spot price at that time, which is equivalent to establishing a compulsory convergence margin system, completely eliminating the possibility of forced liquidation. As an activity of buying and selling standardized financial commodity futures contracts, financial futures trading is conducted in a highly organized financial futures exchange with strict rules. The basic characteristics of financial futures trading can be summarized as follows:
1. The subject matter of the transaction is financial commodities.
Most of these trading objects are intangible and virtual securities, excluding actual physical goods;
Second, financial futures are standardized contract transactions.
As a trading object, financial commodities are homogeneous, undeliverable and standardized in yield and quantity, such as currency, transaction amount, liquidation date and trading time in commodity market. The only uncertainty is the transaction price;
Three, financial futures trading by public bidding to determine the buying and selling price.
It can not only form an efficient trading market, but also has high transparency and credibility;
Four, financial futures trading to implement the membership system.
Non-members must participate in financial futures trading through member agents. Because the direct transaction is limited to the same member, and the member is also a settlement member, the credit risk of the transaction is small and the security is high.
Normalization of verb (verb's abbreviation) delivery cycle
The delivery period of financial futures contracts is usually three months, six months, nine months or twelve months, and the longest is two years. The delivery time within the delivery period depends on the transaction object.