TY  - JOUR
AU  - Merton,Robert C.
TI  - Financial Innovation and the Management and Regulation of Financial Institutions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5096
PY  - 1995
Y2  - April 1995
UR  - http://www.nber.org/papers/w5096
L1  - http://www.nber.org/papers/w5096.pdf
N1  - Author contact info:
Robert C. Merton
Massachusetts Institute of Technology
Sloan School of Management, E62-634
77 Massachusetts Avenue
Cambridge, MA 02139
Tel: 617 715 4866
E-Mail: rmerton@mit.edu
AB  - New security designs, improvements in computer telecommunications technology and advances in the theory of finance have led to revolutionary changes in the structure of financial markets and institutions.  This paper provides a functional perspective on the dynamics of institutional change and uses a series of examples to illustrate the breadth and depth of institutional change that is likely to occur.  These examples emphasize the role of hedging versus equity capital in managing risk, the need for risk accounting and changes in methods for implementing both regulatory and stabilization public policy.
ER  -