· Dr. Warren Huang panelist speech for 2009 China Derivatives market summit, Pudong, Shanghai, on Proactive structural China/global Forex, commodities, oil, metal, equities derivatives pricing mechanism

Cost and effect of the financial crisis on China Forex, oil, metal, commodities, equities derivatives markets by Dr. Warren Huang, Founder, OSA, San Francisco, USA
US, global housing bubble burst, resulted trillions dollar wealth loss, credit , financial crisis and 4 Q GDP contraction of -6.2 %, Fed rate cut to 0.25 % Fed purchase tT-Bond driving Fed rate ot – 5 %, 30 yr mortgage rate to 4.5 % China export decline 20% in Jan 2009, GDP slowdown to 6.8 % ，rate cuts to 2 %, however still maintain 40 billion trade surplus will provide support to RMB in 6.7 – 6.95 range and 1.75 trillion currency forward and swap market.
Global recession lead to commodity, energy, metal price bubble burst, facing deflation. In 2009 , China CPI down 1.5 %, PPI down 6.6 %
China will maintain current interest rate level 4 trillion stimulus package will maintain GDP above 7.5 % in 2009

· Will volatility become a new asset class soon?
Yes, volatility has become an important asset class, comparable to fixed income asset, with risk premium （CDS spread）quantify the crisis, risks, uncertainty in volatility ( use SP 500 volatility index VIX) while fixed income use inflation for bond yield quantify the uncertainty.

· How liquid is the market?
Currently US provide 7 trillion cash infusion into banking, financial market, with money supply growth up from 5 % to 11 %, while China Peoples Bank provide 1.6 trillion excess liquidity in Jan 2009, with money supply growth up from 16 to 20 .
The banking and markets having excess liquidilty, most of stimulus, bail out money are still stay in the banking ( short term notes, financing) system, without go to the real economy to create consumer and business demand due to global recession, soaring jobless rate.

· Costs of hedging and shorting mechanisms
Integrating economic, industrial sectors demand side, price mechanism fundamentals into market dynamic information, provide reliable forecast for under pricing for long side and overpricing for hedging shorting mechanism, strategy avoided betting on the wrong side of investments

· Developing the local currency bond market – what role should CDS play in the future?

Proactive structural models tracking trade balance, interest rate spread, impact on currency
movement and macroeconomic systemic risks impact on CDS, and its impact on bond yield spread.

· Reinstalling investor, corporate confidence
These proactive decision models, integrating macro, financial, industrial , trade economics into daily derivatives market pricing mechanism, provide the what, why, how and timing of derivatives pricing and risks in investment ,will restalling investors confidence, avoided betting on the wrong side resulted trillion dollar loss. And stimulate corporate users for raw material supply chain procurement, inventory cost and maximize risks adjusted investment return by Dr. Warren Huang March, 2009, Shanghai