Core Viewpoint - The rapid expansion of over-the-counter (OTC) derivatives, particularly structured products like snowballs, has raised concerns about risk management and the underlying business model, especially in light of recent market adjustments that have led to significant losses for some institutions [1][5]. Group 1: Business Functions and Risk Sources - OTC derivatives serve multiple functions within securities firms, including wealth management for high-net-worth individuals and professional investors, as well as providing customized strategies for businesses to hedge operational risks [3]. - The expansion of OTC derivatives has led to the accumulation of various risk sources, including reliance on pricing models and parameter calibration, which may not meet international standards, and a lack of adequate stress testing for extreme scenarios [4]. Group 2: Characteristics of Hedging Transaction Risks - Risk pricing and hedging are typically based on the Black-Scholes framework, but deviations from assumptions such as constant volatility and frictionless markets can lead to significant risks, especially for structured products with barriers [6]. - Key parameters like volatility, dividend rates, and interest rates directly impact the hedging process, and their uncertainty can lead to substantial losses during market fluctuations [7]. Group 3: Full-Cycle Risk Profile of Snowball Structures - A comprehensive risk profile for snowball products includes various structures such as classic snowballs and limited-loss snowballs, each with distinct risk and return characteristics [10]. - The sensitivity of snowball products varies significantly based on their status (not triggered, triggered, or knocked out), with different risk profiles emerging at critical points [12]. Group 4: Multi-Dimensional Risk Management Framework - Risk management should begin at the product design stage, incorporating systematic risk assessments and establishing concentration thresholds to prevent excessive risk accumulation [14]. - A dynamic hedging approach is necessary, utilizing historical data and real-time market information to adjust hedging strategies as market conditions change [16]. - A comprehensive risk monitoring system should be established to assess exposure and implement stress testing under extreme scenarios, enhancing the resilience of capital markets [17].