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 an equilibrium model with restricted investor participation in which strategic arbitrageurs reap profits by exploiting mispricings across different trading locations. We edogonize the asset structure as the outcome of the security design game played by the arbitrageurs. The equilibrium asset structure depends realistically upon consideration such as depth, liquidity and gains from trade. It is not socially optimal in general; the degree of inefficiency depends upon the heterogeneity of investors. Finally we use this framework to formally analyse Shiller's conjecture of the optimality 'macro markets'.

Keywords: Security design; Arbitrage; Restricted participation (search for similar items in EconPapers)
JEL-codes: D80 G18 G20 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2004-10-23
References: Add references at CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/24785/ 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 (2007)
Working Paper: Strategic Financial Innovation in Segmented Markets (2004)
Working Paper: Strategic Financial Innovation in Segmented Markets (2004)
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:ehl:lserod:24785

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().