The innovation of financial instruments keeps bringing challenges to the market and regulation systems. Derivatives create a variety of economic benefits and obligations which may influence the traditional legal concept in commercial and financial sectors. Although some primordial derivatives originated in the commercial practices, the nature of derivatives has raised intensive discussion in the legal history.?? The function of the derivatives is so broad that in the modern market there are so many complex categories of assets portfolios embedded with derivatives. What is the purpose of derivative transactions, risk hedging or speculation? People may blame derivatives as a measure of over-speculation that increases the volatility of the financial market. Derivatives could be detrimental to the market because of the high risks associated with speculation activities and the element of gambling may not be entirely eradicated. However, on the other hand, derivatives can also influence corporate governance.
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