COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1461

Radical Financial Innovation

Robert J. Shiller

April 2004

Radical financial innovation is the development of new institutions and methods that permit risk management to be extended far beyond its former realm, covering important new classes of risks. This paper compares past such innovation with potential future innovation, looking at the process that produced past success and the possibilities for future financial innovation.

Keywords: Risk management, Institutions, Incomplete markets, Livelihood insurance, Behavioral finance, Livelihood risks, Home equity insurance, Country risks

JEL Classification: G10