financial innovation

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Financial innovation

Design of any new financial product, such as exotic currency options and swaps.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Financial Innovation

The creation of a new investment vehicle. For example, one may structure a derivative in a way that has never been done before. Financial innovation can increase efficiency and profits for certain parties. However, it often takes time for regulation to catch up to financial innovation, which can make it risky.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

financial innovation

the development by FINANCIAL INSTITUTIONS of new financial products and processes for the transmission of money and the lending and borrowing of funds, for example, telephone banking services, direct debit systems, credit cards, etc. These developments have augmented the traditional means of transmitting money (cash, cheques) and may have served to increase the velocity of circulation of money. They have also increased the availability of CREDIT and, by creating new ‘NEAR MONEY’ assets, have served to extend the liquidity base of the economy. This has tended to make the application of MONETARY POLICY by the authorities more complex.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Based on the presented analysis of the financial innovations definitions and the mechanism of their creation and implementation, it can be observed that the financial innovations are not a homogenous group of new financial developments.
derivatives markets, model risk, risk management, swaps and other financial innovations.
This chapter will describe how technological change has spurred financial innovations that have driven the aforementioned changes in commercial banking over the past 25 years.
The directive aims to help fund managers and market authorities to reconcile financial innovations with the principles of the UCITS (Undertakings for Collective Investment in Transferable Securities) Directive.
25, will work on studying mechanisms to take community economic development to scale, including bringing an international reach to the institute, as well as new financial innovations for the field and research on mission-related investment by foundations and other nonprofits.
In this work, they present 17 chapters discussing various aspects of these developments in sections covering financial institutions, alliances, IT, and economic growth; financial markets in the IT age; financial innovations and IT; and security, law, and IT.
I thought your readers might be interested to learn that Africa is leveraging various financial innovations to promote regional market developments and fight poverty.
"We will bring together leaders in architecture, building trades, banking and government to consider how sustainable choices can stimulate local economic development by bringing technical and financial innovations into the mainstream," the comptroller said.
Higher wealth not only encourages people to spend more because they feel richer but, with the help of financial innovations such as easier re-mortgaging, also enables increased borrowing.
The book is significant in that it highlights the linkages between financial innovations and the development process, a subject that is understated, if not ignored, by the mainstream as well as development economists.
Accordingly, the financial innovations of recent years have facilitated investment banks' development of commercial banking expertise through money market and other mutual funds, bridge loans, and loan syndications.
As defined in the proposed regulations, the term encompases a variety of financial products including interest rate swaps, caps, floors and collars, commodity and basis swaps, currency swaps, and other financial innovations. As acknowledged in the preamble, the principal purpose and use of these instruments by nondealer corporations is to reduce the risk of changes in prices, interest rates, and currency rates.

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