The second major function is risk management, i.e. through price discovery and risk management tools. The day-to-day tradings on the financial market necessitate continued price discovery and accurate pricing. If we take Government securities yield curve as the risk-free interest rates, financial market will price all kinds of risk premiums of financial products in transactions and send clear signals.
Moreover, financial market also provide all kinds of hedging tools and adequate liquidity to facilitate the selling and buying activities of market participants, and enable effective hedging of risks. Once the foreign investors are investing in the onshore market, they will find a lack of derivatives, hedging tools and other financial products.