Financial innovation and risk sharing

Abstract

In this book they assemble some of their key papers along with a five-chapter overview that not only synthesizes their work but provides a historical and institutional review and a discussion of alternative approaches as well. The lengthy overview surveys the authors' approach to financial innovation, principally their development of a basic theory of risk sharing in an economy with incomplete markets. The first two chapters summarize the history of innovation and illustrate the types of innovation, innovators, and motives for innovation. Chapters three and four look at industrial organization approaches to innovation and outline the authors' theory. The fifth chapter discusses other approaches and an agenda for future research.