An Analysis on Supervision of Financial Innovation Risk

Financial innovation is the motive for financial market. How to unify financial innovation and financial stability is an important issue in establishing a modern financial system. Undoubtedly strengthening financial risk regulation is an important way out. Through analyzing the nature of financial innovation, the article concludes that the nature of financial innovation is a process of continuously launching financial derivatives, thus transferring financial risks and consequently indefinitely extending them. Further analysis is made on what contributes to financial risks and what the phenomena are. Suggestion is put forward that an integrated regulating system including pre-event prevention, in-the-event monitoring and post-event disposal should be set up in order that financial risks can be expected measured, prevented and controlled.