Strategic Financial Innovation in Segmented Markets
AbstractWe study an equilibrium model with restricted investor participation in which strategic arbitrageurs reap profits by exploiting mispricings across different market segments. We endogenize the asset structure as the outcome of a security design game played by the arbitrageurs. The equilibrium asset structure depends realistically upon considerations such as depth and gains from trade. It is neither complete nor socially optimal in general; the degree of inefficiency depends upon the heterogeneity of investors. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: firstname.lastname@example.org, Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 22 (2009)
Issue (Month): 8 (August)
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Other versions of this item:
- Jean-Pierre Zigrand & Rohit Rahi, 2004. "Strategic Financial Innovation in Segmented Markets," FMG Discussion Papers dp520, Financial Markets Group.
- Jean-Pierre Zigrand & Rohit Rahi, 2007. "Strategic Financial Innovation in Segmented Markets," FMG Discussion Papers dp595, Financial Markets Group.
- Rahi, Rohit & Zigrand, Jean-Pierre, 2004. "Strategic Financial Innovation in Segmented Markets," CEPR Discussion Papers 4176, C.E.P.R. Discussion Papers.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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- Chiaki Hara, 2010. "Pareto Improvement and Agenda Control of Sequential Financial Innovations," KIER Working Papers 748, Kyoto University, Institute of Economic Research.
- Hara, Chiaki, 2011. "Pareto improvement and agenda control of sequential financial innovations," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 336-345.
- Thorsten Beck & Tao Chen & Chen Lin & Frank M. Song, 2012. "Financial Innovation: The Bright and the Dark Sides," Working Papers 052012, Hong Kong Institute for Monetary Research.
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