Strategic financial innovation in segmented markets

Rohit Rahi () and Jean-Pierre Zigrand

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study a 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.

Keywords: security design; arbitrage; intermediation; market segmentation (search for similar items in EconPapers)
JEL-codes: D52 G12 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2007-09-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://eprints.lse.ac.uk/24503/ Open access version. (application/pdf)

Related works:
Journal Article: Strategic Financial Innovation in Segmented Markets (2009)
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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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24503

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