Introduction: The Context of Financial Innovations

  • Wesley Mendes-Da-Silva


The main function of the financial system is to facilitate the allocation of financial resources, distributing them well in terms of time and space within an uncertain context. In performing this function, the financial system permits the transfer of financial resources from savers to borrowers as well as the reduction of risk through insurance and diversification (Merton 1992). Since there are uncertainties involved in the future states of many resources, individuals can modify their behavior depending on their aversion to the risk that results from these uncertainties. However, these risks can frequently be addressed through financial instruments that satisfy the demands voiced by participants in the financial system. These financial instruments can contribute as much to the economy as the technologies that support them.


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Authors and Affiliations

  • Wesley Mendes-Da-Silva
    • 1
    • 2
  1. 1.Sao Paulo School of Business Administration (FGV/EAESP)Sao PauloBrazil
  2. 2.University of Texas at AustinAustinUSA

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