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August 28, 2010
Financial Innovation
What is financial innovation & is financial innovation desirable?
Today, I spoke on "Financial Innovation" at a PRMIA Bangalore chapter event organized at New Horizon Leadership Institute, Bengaluru.
A copy of my presentation is available here (A part of this presentation is from an Indian perspective): Download file
Like so many topics, my thinking on this is evolving. I look forward to reader comments.
Posted by amgodbole at August 28, 2010 11:40 AM
The presentation you had given was indeed thought provoking. Like always, you amaze me by the vast number of real world examples, statistics and incidents that you come up with during discussions.
Posted by: Krishna Akella at September 1, 2010 06:53 PM
Very insteresting.
I'd suggest we look to the fundamental value of innovation, as a way to get risks to the appropriate market participant.
In other words, the goal is to parse risks most effectively, in order to (i) price, (ii) manage, and (ii) mitigate them, properly.
For example, life insurance allows experts in mortality to remove that source of volatility from the non-experts, at a price.
Likewise, an exporter can concentrate on manufacturing and marketing, while letting forex traders deal with the currency volatility.
Seen in that light, we have a framework to criticize unproductive innovations. In the recent financial crisis, we saw efforts which at best merely re-packaged risks with no change in effectiveness of ownership, and at worst hid risks for deceptive sale to outright unsuitable holders.
Posted by: Robert Arvanitis at September 15, 2010 03:17 PM
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