Managing the Risks of Financial Innovations in Banking

With the subprime crisis, people are paying more and more attention to analyze financial innovations and manage the risks. In this paper, firstly, we discuss the effects of risks, which may bring adverse or harmful impacts to us, and then we define the risks of financial innovations in banking, which are mainly market risk, credit risk and operational risk. Next, we study ways to calculate market risk, credit risk and operational risk, respectively. Finally, we analyze the effects of regulations in managing risks of financial innovations in banking. From our analysis, we find that people can take out countermeasures to assess and manage risks of financial innovations in banking to avoid or reduce losses.