IDEAS home Printed from https://ideas.repec.org/p/red/sed018/355.html

Markets for Financial Innovation

Author

Listed:
  • Ana Babus

    (Washington University in St. Louis)

  • Kinda Hachem

    (University of Chicago)

Abstract

Regulators have pushed for centralized trading as a way to increase transparency following the recent financial crisis. However, the nature of the security being traded may change when the market structure in which it trades is forced to change. In this paper, we develop a model to explore interactions between market formation and the design of new financial securities. Our results rationalize why debt contracts are frequently traded in over-the-counter markets whereas equity is typically traded on exchanges. We also find that regulations promoting universally larger markets can reduce investor welfare by reducing the production of securities with less variable payoffs.

Suggested Citation

  • Ana Babus & Kinda Hachem, 2018. "Markets for Financial Innovation," 2018 Meeting Papers 355, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:355
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2018/paper_355.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Jérôme Dugast & Semih Üslü & Pierre-Olivier Weill, 2022. "A Theory of Participation in OTC and Centralized Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 3223-3266.
    3. Jiaji An & He Di, 2024. "How Can Financial Innovation Curb Carbon Emissions in China? Exploring the Mediating Role of Industrial Structure Upgrading from a Spatial Perspective," Sustainability, MDPI, vol. 16(11), pages 1-20, May.

    More about this item

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed018:355. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.