tailieunhanh - Lecture Financial markets - Lecture 3: Technology and invention in finance

The main contents of this chapter include all of the following: Financial markets have shown rapid change in the past, information technology is an important factor in the change, and portends important changes in the future, other changes are due to simple invention, and slow public acceptance of new information. | Lecture 3: Technology and Invention in Finance Economics 252, Spring 2008 Prof. Robert Shiller, Yale University Change and Information Technology • Financial markets have shown rapid change in the past • Information technology is an important factor in the change, and portends important changes in the future • Other changes are due to simple invention, and slow public acceptance of new information Comparison with 1970 • In 1970, there were no organized options markets • No financial futures markets • No swaps • No strips • No electronic trading • Transactions costs precluded much trading Basic Themes of this lecture • Long run risks still not managed well • Invention of new risk management techniques, like other invention, proceeds fitfully, then spreads, never regresses • Proper psychological framing important for properly “human-engineered” risk invention • New information technology opens up many avenues for new risk management technology in the future Risk Theme • Biggest risks are long-term nonfinancial risks, currently poorly managed by available institutions • There are substantial uncertainties about future income distribution • Risk management broadly interpreted, includes tax and welfare .