Financial Innovations

The article presents that financial innovation have played a vital role in some bank failures; as the markets undergone significant changes over recent decades, this in consequence has brought some new instruments and techniques into practice in both national and international financial markets. This has resulted in international banks operating in a more risky environment. These financial innovations have facilitated the management of risks in a better way in both dealings and operations. Financial innovation as derivates are a kind of insurance policy, they can be used as a hedge against the unfavorable movements in currencies, interstates or commodity prices derivatives are just a shift in risk, also they can be used to limit, manage and manipulate risk in different manners.