Strategic Financial Innovation in Segmented Markets

Rohit Rahi () and Jean-Pierre Zigrand ()

The Review of Financial Studies, 2009, vol. 22, issue 8, 2941-2971

Abstract: We 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: journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2009
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Related works:
Working Paper: Strategic financial innovation in segmented markets (2007)
Working Paper: Strategic Financial Innovation in Segmented Markets (2007)
Working Paper: Strategic Financial Innovation in Segmented Markets (2004)
Working Paper: Strategic financial innovation in segmented markets (2004)
Working Paper: Strategic Financial Innovation in Segmented Markets (2004)
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