Certain and uncertain utility: A new perspective on financial innovation

Hammad Siddiqi

Economics Letters, 2017, vol. 158, issue C, 7-9

Abstract: We show that discontinuous preference over certain and uncertain outcomes (as in Andreoni and Sprenger, 2009, 2012) have interesting implications for financial innovations. It motivates financial innovations aimed at carving riskless assets from risky ones. If improbable risks are neglected, then excess carving may take place with disastrous subsequent consequences.

Keywords: Certain utility; Uncertain utility; Financial innovation (search for similar items in EconPapers)
JEL-codes: D81 D90 G01 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176517302367
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:158:y:2017:i:c:p:7-9

DOI: 10.1016/j.econlet.2017.06.009

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().