The financial crisis is a once-in-a-century crisis, and derivative financial products have played a role in fueling the subprime mortgage crisis, and CDO in derivative financial products has played a very important role in the American subprime mortgage crisis. Firstly, this paper discusses the structure of loan derivatives and the hidden risks behind this structure, describes the spread ways of financial derivatives risks, and discusses how CDO products are transmitted from the lending market to the capital market, and then expand the lending market after being fed back from the capital market. Secondly, the characteristics of CDO CDS products are analyzed to illustrate its role in the subprime mortgage crisis. Finally, taking AIG crisis as an example, CDO and CDS are analyzed, and the harm of the subprime mortgage crisis to financial companies and the enlightenment to the development of financial derivative instrument in China are summarized.
Keywords: CDO, CDS, Lehman Brothers, loan