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New Financial Instruments and Institutions

Opportunities and Policy Challenges

edited by Yasuyuki Fuchita and Robert E. Litan

Publication Year: 2007

New financial instruments —such as structured financial products and exchange-traded funds —and new financial institutions —including hedge funds and private-equity funds —present opportunities as well as policy and regulatory challenges in U.S. and Japanese financial markets. This book presents cutting-edge research from experts in academia and the financial industry on new instruments and new institutions while contrasting their developments in the different countries. The contributors highlight the innovative way in which Japanese financiers and government officials have learned from the U.S. regarding the introduction of new instruments into their market. New Financial Instruments and Institutions continues the productive collaboration between the Brookings Institution and the Nomura Institute of Capital Markets Research in examining current issues in capital and financial markets. Contributors include Jennifer Bethel (Babson College),Todd Broms (Managed ETFs, LLC), Frank Edwards (Columbia Business School), Allen Ferrell (Harvard Law School),Yasuyuki Fuchita (Nomura Institute of Capital Markets Research), Gary Gastineau (Managed ETFs, LLC), Ken Lehn (University of Pittsburgh), Josh Lerner (Harvard Business School), Frank Partnoy (University of San Diego Law School), Adam Posen (Institute for International Economics), Ken Scott (Stanford Law School), Steve G. Segal (Boston University, J.W. Childs Associates),Yuta Seki (Nomura Institute of Capital Markets Research, New York), Erik Sirri (Babson College), and Randall Thomas (Vanderbilt Law School).

Published by: Brookings Institution Press

Cover Page

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Title Page

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Copyright Page

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Table of Contents

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pp. v-vi

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Preface

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pp. vii-

The Brookings Institution and the Nomura Institute of Capital Markets Research have joined in a collaborative project, headed by Robert Litan, Brookings senior fellow, and Yasuyuki Fuchita, director of the Nomura Institute of Capital Markets Research, ...

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Chapter 1: Introduction

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pp. 1-14

One of the most important characteristics of financial markets and institutions is change. The industry, and the products and services it offers, is constantly evolving in response to financial innovations developed by entrepreneurs within existing and new institutions and the ever-changing needs of users and suppliers of funds. ...

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Chapter 2: ETFs and REITs in Japan: Innovation and Steps for Future Growth

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pp. 15-58

In Japan, although the markets for exchange-traded funds (ETFs) and the real estate investment trust (REIT) both emerged in 2001, each has a different story of how it came into being. The speed of growth of the two markets has also differed. However, ETFs and REITs are collective investment schemes traded in the public securities market, ...

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Chapter 3: Securitization of Residential Mortgages: Can Japan Create a "Good" GSE?

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pp. 59-90

Securitization of residential mortgages, like derivatives, is a financial innovation that has seen explosive growth over the past two decades or so. In the United States, securitization of home loans got its start as a response to the regional partitioning of the housing finance market caused by state banking regulations. ...

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Comment on Chapters 2 and 3

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pp. 91-100

The papers by Yasuyuki Fuchita and Yuta Seki are of extraordinary detail and include some very useful information in their figures and tables. Upon their publication in the latest volume by the Brookings Institution and the Nomura Institute of Capital Markets Research, ...

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Chapter 4: Gap Filling, Hedge Funds, and Financial Innovation

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pp. 101-140

During the early 1980s, corporate raiders represented a potentially important monitoring mechanism of corporate management in the United States. They bought large stakes in target companies and caused significant restructuring of U.S. businesses. Many companies responded to this hostile takeover wave ...

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Chapter 5: The Rise of the U.S. Private Equity Market

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pp. 141-161

In a classic article titled “Eclipse of the Public Corporation,” Michael Jensen wrote that “the publicly held corporation . . . has outlived its usefulness in many sectors of the economy and is being eclipsed.”1 Jensen’s article, written at a time when dozens of large U.S. corporations, ...

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Comment on Chapters 4 and 5

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pp. 162-166

It is a pleasure to have the opportunity to comment on the papers by Frank Partnoy and Randall Thomas and Thomas Boulton, Kenneth Lehn, and Steven Segal. Both papers cover a wide range of recent developments in financial markets, and both raise provocative policy issues. ...

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Chapter 6: Policy Issues Raised by Structured Products

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pp. 167-192

One of the most important changes in modern finance over the last three decades is the increased understanding and use of financial derivatives. These contracts, which include options, futures, and swaps, are created by financial firms for corporate issuers who seek to tailor their liability claims and lower their costs of capital. ...

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Chapter 7: The Development of Improved Exchange-Traded Funds in the United States

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pp. 193-209

Many of mankind’s great ideas owe at least some of their success to serendipity. A popular legend suggests how serendipity helped mankind learn the usefulness of fire. When one of our ancestors came upon the site of a fire that had been started by lightning, this early human discovered that an animal’s carcass ...

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Comment on Chapters 6 and 7

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pp. 210-216

Since I am addressing two papers with distinct concerns, I will take them up in the order presented. Fortunately, my brief does not extend to the Japanese securities market experience, about which I learned a great deal, indeed all I know, during this conference. ...

Contributors

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pp. 217-218

Index

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pp. 219-227


E-ISBN-13: 9780815729846
E-ISBN-10: 0815729847

Page Count: 227
Publication Year: 2007