The concept of financial innovation is a new thing created or introduced through the reorganization and creative changes of various elements in the financial field. Financial innovation in a narrow sense refers to financial business innovation. After relaxing the conditions for the establishment of banks, canceling or relaxing the management of bank assets and liabilities, canceling or relaxing interest rate control and foreign exchange control, and allowing banks and non-bank financial institutions to implement cross-business and other financial controls, western developed countries have strengthened the competition among various financial institutions and produced a series of new financial commodities and trading means.

The driving force of financial innovation: 1. Financial innovation is the objective requirement of the development of commodity economy; 2. Financial innovation is the need to overcome various risks in the economic environment; 3. Financial supervision and financial liberalization have promoted the development of financial innovation; 4. Scientific and technological progress has accelerated the pace of financial innovation.

For example: swaps, options and forward interest rate agreements (FRA).