MOTIVATING FACTORS FOR CONSUMERS TO PARTICIPATE IN DERIVATIVE MARKET IN HAINAN, CHINA

Abstract

Derivatives, which are valued using contracts that consider underlying factors, and risk hedging strategies have become more popular as a result of the liberalisation and deregulation of the world's financial markets. The majority of Chinese users of derivatives are hedgers; option traders include hedge funds, speculators, and arbitragers. The acceptance of derivatives and mutual funds has grown as a result of the entry of foreign investment institutions (FIIs) into the capital markets. Essential economic tasks that lessen financial market volatility include price discovery and risk management. The fast growth of China's financial derivatives markets may be attributed to many factors, including the rapid integration of financial markets, the emergence of information technology, and the rising significance of services to the Chinese economy. The purpose of research assessing participants' derivatives knowledge and use was to assess participants' derivatives knowledge and usage. According to the research, smaller investors often lack knowledge regarding derivatives; thus, regulators from the stock exchange, financial industry, and firms that deal in derivatives should work together to increase investor knowledge. Through securitization, market risks in underlying assets may be unbundled and repackaged, and the increasing use of derivatives for proactive corporate risk management has an influence on macroeconomic concerns and monetary policy.