Markets for financial innovation

Pareto Improving Financial Innovation in Incomplete Markets

Financial innovation in an existing asset generically supports a Pareto improvement, targeting the income effect. This result, as several on taxation, owes to one unifying notion: that an intervention generically supports Pareto improvements if the implied price adjustment is sufficiently sensitive to the economy’s risk aversion. Elul (1995) and Cass and Citanna (1998) introduce financial innov...

Markets for Financial Information

Machine learning algorithms for time series in financial markets

This research is related to the usefulness of different machine learning methods in forecasting time series on financial markets. The main issue in this field is that economic managers and scientific society are still longing for more accurate forecasting algorithms. Fulfilling this request leads to an increase in forecasting quality and, therefore, more profitability and efficiency. In this pa...

Financial Innovation

Background Bitcoin, a peer-to-peer electronic currency, is a distributed ledger system (Nakamoto 2009). Every transaction is broadcast and verified by all nodes in the network through a particular consensus mechanism (Bonneau et al. 2015; Yermack 2013). Every node collects transactions in a block and the block is associated with a difficult mathematical problem. Solving that problem is called m...

Markets for Financial Transmission Rights

This paper surveys the markets for financial transmission rights (FTRs) around the world. FTRs are used to hedge the costs associated with transmission congestion. Currently these rights are in use in PJM, New York and New England. A variant of financial transmission rights, which has both a physical and a financial aspect, was introduced in California in 2000. Similarly, flowgates were introdu...