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- Publisher Website: 10.1006/jeth.1995.1004
- Scopus: eid_2-s2.0-0000178282
- WOS: WOS:A1995QN65900004
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Article: Financial Innovation and Arbitrage Pricing in Frictional Economies
Title | Financial Innovation and Arbitrage Pricing in Frictional Economies |
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Authors | |
Issue Date | 1995 |
Citation | Journal of Economic Theory, 1995, v. 65, n. 1, p. 117-135 How to Cite? |
Abstract | Frictional economies are fundamentally different from their frictionless counterparts. For example, in frictional economies, the price function is sublinear and thus there will be incentives to innovate. When decomposing existing securities and opening new markets, innovators serve important economic functions, such as allowing investors to obtain consumption at lower costs, enabling investors to achieve better risk sharing, and making the fundamental value of more payoffs observable. In particular, innovators serve these functions even when they introduce redundant securities that are not yet issued. Furthermore, in frictional economies, the replication-based arbitrage valuation approach tends to overprice certain securities while underpricing others. Journal of Economic Literature Classification Numbers: C61, G10, G12, G20. © 1995 Academic Press. All rights reserved. |
Persistent Identifier | http://hdl.handle.net/10722/212655 |
ISSN | 2023 Impact Factor: 1.4 2023 SCImago Journal Rankings: 3.218 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Chen, Zhiwu | - |
dc.date.accessioned | 2015-07-28T04:04:35Z | - |
dc.date.available | 2015-07-28T04:04:35Z | - |
dc.date.issued | 1995 | - |
dc.identifier.citation | Journal of Economic Theory, 1995, v. 65, n. 1, p. 117-135 | - |
dc.identifier.issn | 0022-0531 | - |
dc.identifier.uri | http://hdl.handle.net/10722/212655 | - |
dc.description.abstract | Frictional economies are fundamentally different from their frictionless counterparts. For example, in frictional economies, the price function is sublinear and thus there will be incentives to innovate. When decomposing existing securities and opening new markets, innovators serve important economic functions, such as allowing investors to obtain consumption at lower costs, enabling investors to achieve better risk sharing, and making the fundamental value of more payoffs observable. In particular, innovators serve these functions even when they introduce redundant securities that are not yet issued. Furthermore, in frictional economies, the replication-based arbitrage valuation approach tends to overprice certain securities while underpricing others. Journal of Economic Literature Classification Numbers: C61, G10, G12, G20. © 1995 Academic Press. All rights reserved. | - |
dc.language | eng | - |
dc.relation.ispartof | Journal of Economic Theory | - |
dc.title | Financial Innovation and Arbitrage Pricing in Frictional Economies | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1006/jeth.1995.1004 | - |
dc.identifier.scopus | eid_2-s2.0-0000178282 | - |
dc.identifier.volume | 65 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 117 | - |
dc.identifier.epage | 135 | - |
dc.identifier.eissn | 1095-7235 | - |
dc.identifier.isi | WOS:A1995QN65900004 | - |
dc.identifier.issnl | 0022-0531 | - |