Financial Innovations and the Welfare of Nations

1. Front Matter

   Pages i-xii

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2. Financial Innovations and the Dynamics of Emerging Capital Markets

   1. Financial Innovations and the Dynamics of Emerging Capital Markets

      • Laurent L. Jacque

      Pages 1-21

3. Financial Innovations and Systemic Risk

   1. Front Matter

      Pages 23-23

      PDF

   2. Fads and Fashions in the Policy Response To Financial Market Crises

      • Avinash Persaud

      Pages 25-40

   3. Towards a Global Financial Architecture

      • Peter Christoffersen, Vihang Errunza

      Pages 41-60

   4. The New Capital Adequacy Framework and the Need for Consistent Risk Measures for Financial Institutions

      • Michel Crouhy, Dan Galai, Robert Mark

      Pages 61-85

   5. Systemic Risk

      • Scot A. C. Gould, Stephen A. Naftilan, Sarkis J. Khoury, Danae J. Wright

      Pages 87-106

4. Financial Innovations and Capital Market Integration

   1. Front Matter

      Pages 107-107

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   2. The Secondary Market for Latin American Debt

      • Robert Grosse

      Pages 109-126

   3. The Role of American Depositary Receipts in the Development of Emerging Markets

      • Alberto Moel

      Pages 127-153

   4. Screening for Blue-Chip Potential During the ‘Genesis’ of Equity Markets

      • Oliver S. Kratz

      Pages 155-173

   5. Privatization and Business Valuation in Transition Economies

      • Raj Aggarwal, Joel T. Harper

      Pages 175-196

5. International Securitization Innovations

   1. Front Matter

      Pages 197-197

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   2. Cross-Border Securitization

      • Tamar Frankel

      Pages 199-221

   3. A Tale of Two Citis

      • Paul M. Vaaler

      Pages 223-245

   4. The Promise and Limits of Financial Engineering in Emerging Markets

      • Claire A. Hill

      Pages 247-265

   5. Engineering a Way Around the Sovereign Ceiling

      • Anne Zissu, Charles Stone

      Pages 267-281

   6. Chargeurs Wool: A Case Study in Securitization

      • Antoine Hyafil

      Pages 283-297

6. Financial Derivatives Innovations

   1. Front Matter

      Pages 299-299

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   2. Insurance: From Underwriting to Derivatives

      • Eric Briys, François de Varenne

      Pages 301-314

The central question addressed in Financial Innovations and the Welfare of Nations is how the transfer of financial innovations from developed to developing economies can nurture the dynamics of emerging capital markets. National capital markets can be positioned along a continuum ranging from embryonic to mature and emerged markets according to a decreasing "national cost of capital" criterion. In the introductory chapter Laurent Jacque argues that newly emerging countries are handicapped by a high cost of capital due to "incomplete" and inefficient financial markets. As capital markets graduate to higher level of "emergedness", their national firms avail themselves of a lower cost of capital that makes them more competitive in the global economy and spurs economic growth. Skillful transfer of financial innovations to emerging markets often encourages the deregulation of the country's financial services sector. This results into new conduits for a more efficient capital allocation process such as commercial paper, securitized consumer finance and other disintermediated modes of financing which out-compete traditional financial intermediaries (mostly commercial banks), reduce households' cost of living and conjointly fuel the dynamics of emerging markets. Our response to the central question of how the transfer of financial innovations can enhance the Wealth of Nations is to show that it reduces the cost of capital while not unduly increasing systemic risk. Part I examines the relationship between financial innovations and systemic risk of the international financial system.

• Banking
• Capital Markets
• Credit Derivatives
• Derivatives
• Equity Market
• Finance
• Financial Market
• Investment
• Investments

Praise for Financial Innovations and the Welfare of Nations
`In an increasingly connected world financial flows and innovation have taken center stage. For anyone who wants to understand how this new international arrangement affects one's life, business, and nation, this book is a must read.'
Walter B. Wriston, Former CEO, Citigroup
`This is a first-rate conference volume that covers all of the salient dimensions of innovation in modern financial markets. For innovations to contribute to the System in a durable way, they must be perceived as value-adding for both intermediaries and end-users, and the innovative structures must carry acceptable systemic risks. The essays in this collection provide a compelling overview of the innovation process and its impact on the financial dynamics of the global economy.'
Ingo Walter, Charles Simon Chair in Applied Financial Economics and Director, New York University Solomon Center

• Fletcher School of Law and Diplomacy, Tufts University, USA

  Laurent L. Jacque, Paul M. Vaaler

• HEC School of Management, France

  Laurent L. Jacque

Laurent L. Jacque is a Professor of International Finance and Banking and Director of the Program of International Business Relations at the Fletcher School (Tufts University). He is also Professor of Finance and International Business at the HEC School of Management (France). Paul M. Vaaler is Assistant Professor of International Business, and Director of the Hitachi Center for Technology and International Affairs at the Fletcher School (Tufts University).

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