Modern Financial Markets and the Complexity of Financial Innovation

摘要

Social investing will be examined as an example of modern institutional innovations with respect to the complexity of financial markets. Social impact bonds will be used as a case study of a particular innovative financial instrument in order to understand the complexity and resulting challenges of these potential market dynamics. The author argues that post-crisis regulatory regime governing US and European markets require substantial work to fully address the challenges derived from financial innovations. In particular, existing regulation, technologies, information asymmetry, agency cost, and innovation pace need to be considered in order to understand the factors which will determine likely outcomes of social impact bonds. Social Investing and the embryonic stage of current development reflect certain 'unknown areas'. This paper addresses the needs of the post-embryonic stage of the theoretical framework of financial market innovations.