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 trading locations.� We edogonize the asset structure as the outcome of the security design game played by the�arbitrageurs.� The equilibrium asset structure depends realistically upon consideration such as depth, liquidity and gains from trade.� It is not socially optimal in general; the degree of inefficiency depends upon the heterogeneity of investors. Finally we use this framework to formally analyse Shiller's conjecture of the optimality 'macro markets'.��
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Bibliographic InfoPaper provided by Financial Markets Group in its series FMG Discussion Papers with number dp520.
Date of creation: Oct 2004
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Web page: http://www.lse.ac.uk/fmg/
Other versions of this item:
- Rohit Rahi & Jean-Pierre Zigrand, 2009. "Strategic Financial Innovation in Segmented Markets," Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 2941-2971, August.
- 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.
- 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.
- Hara, Chiaki, 2011. "Pareto improvement and agenda control of sequential financial innovations," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 336-345.
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