文档介绍：Institute for Empirical Research in Economics
University of Zurich
Working Paper Series
ISSN 1424-0459
Working Paper No. 35
An Evolutionary Approach to Financial Innovation
Marc Oliver Bettzüge and Thorsten Hens
July 2000
An Evolutionary Approach
to Financial Innovation
by
Marc Oliver Bettzuge¨ and Thorsten Hens1
first version: June 1997
revision: July 1999
final revision: July 2000
Institute for Empirical Research in Economics
Universit¨at Zuric¨ h
Blumlisalpstrasse¨ 10
CH-8006 Zuric¨ h
Switzerland
1Both authors are at the University of Zurich. We wish to thank A. Gerber, A. Kirman, J.-J.
Herings, W. Hildenbrand, K. R. Schenk–Hopp´e, F. Vega-Redondo, B. Zame and seminar par-
ticipants in Bergen, Berlin, Bonn, Bielefeld, Cambridge, CORE, Lausanne, Mannheim, Tilburg,
Berkeley, USC, Stanford and the participants of the Geneva-Venice workshop on plete Mar-
kets in Venice as well as of ESEM ’96 in Istanbul, Antalya ’97, SITE ’97 for ments.
Financial support by the Swiss Stock Exchange as well as by Deutsche Forschungsgemeinschaft
through Sonderforschungsbereich 303 at the University of Bonn and through the research project
”Evolution in Financial Markets” at the University of Bielefeld is gratefully acknowledged. Last but
not least we are grateful for many very useful suggestions by the referees of the RES. All remaining
errors are ours.
Abstract
The purpose of this paper is to explain why some markets for financial
products take off while others vanish as soon as they have emerged. To this
end, we model an infinite sequence of CAPM–economies in which financial
products can be used for insurance purposes. Agents’ participation in these
financial products, however, is restricted. Consecutive stage economies are
linked by a mapping (“transition function”) which determines the next pe-
riod’s participation structure from the preceding period’s participation. The
transition function generates a dynamic process of mark