Simple innovation of financial asset (Q5941790)

The author considers the role of financial exchange in determining the equilibrium structure of a frictional financial market with a single financial asset. He studies optimal innovation of financial assets with transaction costs, namely, \(b \geq 0\) and \(s \geq 0\), buying and selling per-unit commissions, possibly nonequal, that is the difference with the previous papers devoted to the same topics [see \textit{D. Duffie} and \textit{M. O. Jackson}, Rev. Financial Stud. 2, 275-296 (1989)]. The basic model is a simple model over two periods \((t=0,1)\) with uncertainty at \(t=1\). At \(t=0\) there are spot markets for the single current commodity and financial markets for the single financial asset, and the agents trade the consumption goods and the financial asset. The existence theorem of a general economic equilibrium is proved and the commission-revenue maximization exchange, that is, innovation of financial asset, is examined.