Innovations in financial markets and the possibility of their application in Russia Vladimir Sergeevich Krylov. Classification of financial innovations A new financial product can be

Introduction………………………………………………………………………………3

1. Financial innovation: essence and prerequisites………………....5
1. Prerequisites for the emergence of financial innovation……….5
2. The concept of financial innovation……………………………8
3. Financial innovations as a market product………………. 14
2. The impact of financial innovation on the country’s economy………….. 18
1. Economic analysis of financial innovation…………… 18

2.2. The impact of financial innovation on the country’s economy…… 20

Conclusion………………………………………………………………………………… 21

References……………………………………………………… 23

Appendix……………………………………………………………… 24

Introduction

Financial innovation – new financial products, technologies and institutions – has had an increasing impact on economic activity around the world in recent years.

In recent years in Russia there has been a sharp increase in attention to everything related to finance in the broad sense of the term: the financial activities of enterprises and joint-stock companies, securities, the functioning of banks, stock exchanges, insurance companies, pension funds, etc. Interest in receiving economic and, especially, financial and banking education is increasing. Work on translating and publishing foreign financial literature in Russian has sharply intensified. Works by domestic authors also appear in the area under consideration.

Despite the significantly increased flow of financial information (in printed and electronic form) for the Russian user, it is much smaller than the “ocean” of global economic information that is available to specialists, teachers and students in foreign countries. But one important area is completely underrepresented. This area is financial innovation.

Therefore, financial innovation is a hot topic today, which requires detailed study, development, analysis and further application in practice in order to improve the financial sector of the economy.

The objective of the essay is to consider financial innovations as an independent economic category operating in the financial market with all its features.

Objectives of the work: firstly, to reveal the concept of financial innovation, their essence and prerequisites, and secondly, to provide an economic analysis of financial innovation, to identify the impact of the phenomenon under consideration on the country’s economy.

The object of research in this work is financial innovation. The subject of the study is the market of financial innovations as an independent sector of the general financial market.

The abstract presents two chapters: financial innovation: the essence and prerequisites and the impact of financial innovation on the country's economy. The first chapter presents the main points and concepts characterizing this phenomenon. The second chapter reveals the consequences of innovations and provides an economic analysis of innovations.

The content of this work is both theoretical and practical. The practical basis is provided by examples that allow a more clear understanding of the phenomenon under consideration. The theoretical basis is presented in educational and periodical literature, as well as information from the Internet. The appendix includes tables and charts that clearly demonstrate the nature and importance of financial innovation.

1. Financial innovation: essence and prerequisites

1. Prerequisites for the emergence of financial innovations

Financial innovation refers to new financial instruments (new methods of working in the financial market).

25 years ago, a large number of financial instruments that are now taken for granted simply did not exist. For example, checking accounts (such as NOW = negotiable order of withdrawal, checking account with interest payment and write-off for non-cash payments) were not available until 1972. Today, the number of financial instruments available to people with various amounts to invest has increased dramatically. The number of new financial institutions has also increased.

An example is the situation that developed during the 1979 crisis in the United States; which was largely caused by the emergence of innovation. It was offered by mutual funds, which themselves were a relatively new financial institution. They equated the share to one dollar, thereby allowing investment in any amount (in other securities it was possible only for an amount that was a multiple of the face value). Mutual funds also offered to issue credit cards. Of course, all this was extremely tempting and could not but cause a large influx of customers. As a result, there is a rapid development of mutual funds. This led to a distortion in the financial market (no one made deposits in Sberbank) and a terrible financial crisis ( savings and loan associations), which lasted 4 years. To eliminate it, a special association was created and even the segmentation of the banking sector was abolished. One of the therapeutic measures was also the creation of NOW.

On the current account, interest was zero, but a plastic card could be issued. In parallel and in connection with it, a NOW account was established for a certain amount. Thus, when opening an account, the client received a card with the ability to pay with it; at the same time forming a negative balance on the current account. Instantly, the required amount was transferred from NOW and restored the zero balance. So the banks returned their clients, essentially offering the same services as mutual funds. Eventually, segmentation was reintroduced in 1986.

What explains these revolutionary changes in the financial system and the proliferation of new financial products that have become available to consumers?

As in other sectors of the economy, the main goal of the financial industry is to make a profit by selling its products. If, for example, a soap company sees a need in the market for a laundry detergent; then it will develop this product to meet this need. Financial institutions are also developing new products, both for their own purposes and for their clients. Innovation in this sector of the economy is mainly driven by the same factors as in other sectors.

But we must not forget about another important reason for the emergence of new financial instruments: the desire to avoid more stringent restrictions than those faced by firms from other sectors of the economy.

Using credit cards as an example, we will consider the main factors influencing the development of financial innovation.

The most important factor is technology. The use of credit cards became possible only as a result of the creation of telephone and computer networks, as well as other, more complex telecommunication systems, technical equipment and software for information processing. However, for credit cards to become an important part of the modern financial system, financial services firms constantly seeking new profit opportunities had to be prepared to take advantage of this advanced technology. Households and firms had to be ready to purchase these cards.

In the history of innovation, it often happens that the firm that pioneers the development of some potentially economically profitable idea does not reap the greatest benefits from it. This is also true for credit cards. The first company to offer the use of credit cards for international travel was Diners Club, founded immediately after the end of World War II. The firm's success prompted two other companies, American Express and Carte Blanche, to offer similar credit card programs.

Firms offering services for the use of credit cards (usually a certain percentage of the purchase price), as well as in the form of interest that is paid for the use of credit by the owners of these cards (based on the account balance). The largest expenses of such firms are transaction costs, losses due to theft of cards and the inability of their owners to repay their obligations.

When commercial banks first tried credit cards in the 1950s, they found that their operating costs were too high to compete with companies providing similar services. However, in the late 60s, these costs dropped significantly due to the development of computer technology, and banks could already become serious competitors to such firms. Today, the leaders in the market for services using credit cards are two large banking systems: Visa and Master Card, and the share of Diners Club and Carte Blanche has decreased significantly.

The current need for innovation is caused by the presence of a crisis in an economic or other process and the need to immediately eliminate this crisis through innovation.

This innovation is crisis innovation. The main feature that defines a crisis innovation is the solution to the problem of selling a product (work, service) due to a drop in demand for this product and a decrease in the volume of its sales, as well as a solution to a more complex problem - the problem of the survival of an economic entity in the market in conditions of fierce competition. Crisis innovation is aimed at eliminating the organizational, production, economic or financial crisis of a given economic entity.

A strategic need is the need for innovation for the future. It is caused by long-term forecasts of economic activity, for example, forecasts of losses in the competitiveness of a product, a decline in the image of an economic entity, its possible bankruptcy, etc. The goal of innovation here is to increase the competitiveness of the product and the entire economic entity in the future. This innovation is development innovation.

The classification of innovations is shown in Fig. 1. (see appendix). The classification scheme of innovation includes the type and form of innovation.

A type of innovation is a set of individual innovations brought together into a single group according to certain signs (signs) that make it possible to distinguish this group of innovations from other groups. For example, in innovations identified by target attribute, the types of innovations are crisis innovation and development innovation; in innovations identified by external characteristics, the types of innovation are product and operation, etc.

The type of innovation includes different forms of innovation. A form of innovation is a group of innovations united by a single way of existence or a single essence of any innovation. This is a new technology, a new product, a new insurance product, a new tourism product (tour, cruise, tourist route, etc.), a new production technology, etc.

For example, in 1997, Petrovsky Bank (St. Petersburg), together with the branch of the Pension Fund in St. Petersburg, the City Center for the Assignment and Payment of Pensions and Benefits, and the Federal Postal Service, introduced a new type of loan for pensioners, the so-called microcredit. This microloan is issued to a pensioner for a period until the next accrual of a pension or benefit at a fairly low interest rate.

What is the essence of financial innovation?

1.2. Concept of financial innovation

In the general system of innovation, financial innovation can be distinguished, i.e. innovation that operates in the financial sector. Financial innovation, like any other innovation, is divided into crisis innovation and development innovation; for a new financial product and a new financial transaction (see the innovation classification scheme shown in Fig. 1 in the appendix).

1. Mandatory sale of a new financial product on the market of financial innovations.

2. Mandatory implementation of a financial transaction on the market or within an economic entity.

3. Functional dependence of financial innovation on time.

4. The peculiarity of the financial product itself, which is expressed, firstly, in the presence of individual and mass demand, secondly, in the functioning of a limited and non-limited product, thirdly, in the existence of a product in the form of property and in the form of property rights (see. adj., Fig. 2.).

The requirement to sell a new financial product or transaction means that if the product or transaction is not sold, then it is not new. They simply don't exist.

The time dependence of financial innovation means that each innovation has its own life cycle.

The economic essence of financial innovation is expressed as follows.

Financial innovation is the final result of innovative activity in the financial sector, implemented in the form of a new financial product or operation.

A financial product is a material part of a formalized service of a financial institution. A financial product has the appearance of a thing (i.e., tangible form) intended for sale on the financial market. A financial product includes securities, coins made of precious metals, a plastic payment or credit card, a bank account agreement, a pension policy, a piece of real estate, etc.

1) massive;

2) single.

A single financial product is an individual product. As a thing, it has characteristic, unique features that set it apart from other products. In other words, a single financial product is a type of any financial asset or product. For example, a specific coin made of a specific precious metal, amber, specific real estate, a share of the issuer - a specific business entity, a bond of the issuer - a specific business entity.

A single financial product has a clearly defined circle of customers. Therefore, it is produced with specific consumers in mind (numismatists, hoarders, investors).

A mass financial product is a product without a clearly defined individuality. He has no special characteristic features. A mass financial product differs only by type of product or financial asset. It includes government domestic loan bonds of all types, a bank deposit account, a pension policy, an insurance certificate, an option contract, futures, etc. A mass financial product is issued with investors and ordinary citizens in mind.

A new financial product is:

1) limited;

2) unlimited.

A limited financial product is a product whose volume or quantity of issue is strictly limited. This volume is established when the product is released. The size of the volume (quantity) of product output is determined by many factors: the size of the authorized capital of the business entity, customer demand, the availability of a unit of the product itself (real estate), etc.

Limited financial products include stocks, bonds, types of credit agreements, real estate and some other products.

An unrestricted financial product is a product whose volume (quantity) of issue is not limited by any quotas. This product is produced with the potential buyer in mind. The number of buyers is an uncertain quantity. Therefore, the volume of issue of an unlimited financial product is not limited by any rules and conditions, except for the factor of consumer demand.

Unlimited financial products include: coins made of precious metals, plastic cards, bank accounts, insurance certificates, pension policies, etc.

The new financial product may also be in the form of:

1) property;

2) property rights.

Property is a thing, that is, it is a material object of ownership. For example, money, measured gold bars; coins, precious stones, securities, land, etc.

Property right means the right to own, dispose of and use certain property. A financial product in the form of property rights includes documents: bank account agreement, credit agreement, pension policy, etc.

Financial operation (Latin operatic - action) means a procedure of action aimed at solving a specific financial management problem. Financial operations include forms of control and accounting of the movement of cash and securities (substitutes for money), methods of planning financial indicators, methodology for drawing up financial plans of various types (balance of income and expenses, cash flow plan, budgeting, operational financial plans, etc.), techniques of financial analysis, forms of organizing financial work in an economic entity, interactive and other similar investment of capital, marketer and other actions related to an attempt to capture an economic entity (for example, the actions of “vulture investors”), actions to capture new financial markets.

Financial transactions as actions have an intangible form, that is, they cannot be touched like a thing and therefore cannot be sold at a fixed price. To be sold, a financial transaction must be materialized in the form of a thing. The form of materialization of a financial transaction is instructions, rules, guidelines, formulas, graphs, i.e. some specific document. This document is already a financial product, and therefore an object of purchase and sale on the financial market.

Innovation literally means doing something new. This new product manifests itself only in the process of selling it on the financial market or when selling it within an economic entity.

The consumer demand for a financial product or transaction determines the degree of novelty of these types of innovations.

If a new product that has appeared on the financial market is in demand and is sold, it means that there are consumers of this product. The level of demand for a new product determines the level of its utility, and therefore the degree of its novelty.

Any new phenomenon is associated with the category “time”.

Time is an important driver of market development and a factor in winning competition. To be ahead of time means to be ahead of competitors. The business entity that was the first to come out with its financial innovation and capture its segment (“niche”) of the market quickly creates an image for itself and it is very difficult for a competitor to fight against it.

The duration of an innovation's functioning on the market is determined by its life cycle.

With a duration of time, any new phenomenon becomes widespread, traditional, i.e. a common occurrence. Financial innovation is a function of time.

where I is financial innovation;

t - time, i.e. the duration of the life cycle of financial innovation;

f is the sign of the function.

Thus, the concept of “financial innovation” operates only within the time frame that is established by the starting and ending points of the life cycle of a given financial innovation. In this regard, a financial product or operation that is new only for a given financial institution, but which has long been implemented in other financial institutions, cannot be considered a financial innovation.

Financial innovations also cannot include minor changes that are private and do not change the content and essence of a financial product or operation. For example, changes in interest rates on bank accounts, terms of bank deposits, etc.

For example, the establishment by Sberbank of Russia from July 15, 1999 of new interest rates on the Savings Savings Bank of Russia deposit for a period of 1 month and 1 day, 2 months and 1 day, 3 months and 1 day in the amount of 26, 27, 28 is not an innovation % per annum respectively; on the deposit “Term Pension of Sberbank of Russia” for a period of 3 months and 1 day in the amount of 28% per annum; establishing, from August 16, 1999, interest rates on the “Pension Sberbank of Russia” deposit in the amount of 18% per annum, on the “School” deposit - 2% per annum.

Thus, financial innovation in its content includes:

a) a new financial product that first appeared only on the Russian financial market, i.e., only in one financial institution;

6) a foreign financial product new to Russia, i.e. a new financial product that has appeared on the Russian financial market, but has long been sold abroad on the financial markets of other countries in accordance with their specific conditions and regulations (jurisdiction);

c) new financial transactions.

1.3. Financial innovation as a market product

Financial innovations are sold on the financial market.

The financial market is a complex system. Its complexity is determined by the heterogeneity of the constituent elements, the diversity of connections between them, and the structural diversity of the elements. This causes diversity and difference in the elements of the system, a multiplicity of criteria for their activity. The dynamism of the financial market as a system is determined by the fact that it is in the constantly changing composition of financial assets and their value, fluctuations in supply and demand for them, etc. This ensures an increase and deepening of connections between the financial market as a system and the external environment and complicates the management process financial assets. The financial market is an open system, as it exchanges information with the external environment.

The financial market is created by financial institutions: banks, exchanges, funds.

Financial innovation is an integral part of the financial market. Without financial innovation, as well as without competition, the financial market cannot exist.

Innovative opportunities of the financial market are presented in Table 1. (see appendix).

Table material 1 shows that each of the seven financial markets of the Russian Federation has great potential for the development of new financial products and new financial transactions.

In the Russian Federation, on the basis of Decrees of the Government of the Russian Federation dated January 6, 1998 No. 6 “On the Federal Debt Center under the Government of the Russian Federation” and dated April 23, 1999 No. 459 “On the sale of confiscated and seized property”, a new financial market has been created and is gradually developing - debt market. The objective of this market is the sale of property (property rights) of business entities - debtors, confiscated and/or arrested by judicial authorities, including those located abroad.

As an independent sector of the general financial market we can distinguish financial innovation market. This independence is due to the role played by financial innovations in the economic process, and the special place of the market of financial innovations in the overall financial market system.

The market for financial innovations is integral in nature. The integrity of the financial innovation market means its inextricable connection with all financial assets, i.e. its inseparability from all types of financial markets in their overall system. The financial market as a complex system includes the foreign exchange market, the market for precious metals and precious stones, the securities market, the money market, the credit market, the insurance market, the real estate market, and the debt market. The same complex system of the financial market also includes the market of financial innovations, thereby forming a single whole.

The place of the market for financial innovations in the general financial market is also determined by the fact that it deals with new goods, that is, new financial products and new financial transactions. Consequently, the market for financial innovation is always the primary financial market.

As an independent sector of the general financial market, the financial innovation market has clear specifics, which are manifested in:

Monopolization of the market caused by the monopolization of innovations (innovations);

The rapid pace of development of the financial innovation market;

Features of the operation of the basic laws of the financial market;

The risks of investing in financial innovations, i.e., the presence of venture capital investment in a new field of activity.

Features of the financial innovation market are determined by the following points.

In the market of financial innovations, transactions are made with new financial products and with new financial transactions, that is, with certain types of innovations (innovations).

The peculiarity of innovation as a market product is the relatively short life cycle of this innovation. After a certain period of time, the innovation turns into a common, i.e., “old,” traditional phenomenon and loses its uniqueness as a new product. The buyer's interest in this product is already disappearing. During the entire life cycle of a financial innovation, the provider or investor-seller objectively has the exclusive right to this new financial product.

A financial product as a new commodity is generally sold only once on the primary financial market.

In most cases, a new financial product is inseparable from the buyer, since it is issued for a specific investor-buyer and is often registered. A new financial transaction developed and implemented by a producer cannot be patented by him. But it is the know-how of this producer and therefore requires monopoly rights to it. The loss of a monopoly on this financial operation means for the producer the loss of his money, profits, and perhaps his entire business. All this objectively forces a financial institution, as a producer of financial innovation, to be a monopolist in the market of financial innovation.

Therefore, the monopoly of financial innovation is an objective phenomenon. The market for financial innovations does not exist without its monopolization.

The second feature of the financial innovation market is its rapid development. The growth rate of the volume of sales of financial innovations always exceeds the growth rate of sales of a financial asset of the corresponding link in the financial market. This is caused by two factors<:>

1) the stimulating role of financial innovation in the economic process;

2) the effect of competition in the financial market.

Financial innovation serves as an important source of attracting additional funds and profit into the economic process. This is an incentive for the development of both the entire economic process and the creation and implementation of new financial products and new operations.

On the other hand, the actions of competitors force the financial institution to take care of the high competitiveness of its products and conduct market research of the financial market and constantly create and sell a new financial product and operation that is in demand.

2. The impact of financial innovation on the country’s economy

2.1. Economic analysis of financial innovation

Financing innovation is always associated with risk, i.e. with the unknown whether the investment will bring profit or will it be unprofitable? Selective risks (from the Latin selektio - choice, selection) are of decisive importance in innovation. Selective risks are the risks of choosing the wrong type of investment in comparison with other types of investment.

Risky investments are venture capital (English venture - dare, take risks). Venture capital operates according to the scheme of capital diversification. It is invested in unrelated projects with the expectation of a quick return on investment and a high rate of return on capital (usually at least 50%). Return on capital means that the amount of cash inflow from capital investment becomes equal to the amount of capital invested. It is measured by the payback period of capital, i.e. it shows the period of time required to recoup the initial capital expenditure. The rate of return on invested capital is the profit received from one ruble of invested capital.

Any economic analysis that explains innovation must look at the incentives that led to the emergence of new financial instruments. Economists argue that this is driven by the desire to maximize profits. In other words, become (stay) rich.

This view leads to a simple conclusion: changes in the economic environment stimulate the search for profitable innovation.

Since 1960, participants in financial relations have faced radical changes in the economic environment. Inflation rates and interest rates have increased significantly and become difficult to predict; which changed the parameters of demand in financial markets. Rapidly developing computer technology has also changed the parameters of supply. In addition, financial restrictions have become even more stringent. Financial market agents realized that the old methods of doing business were no longer profitable. Nobody bought the financial products and services they offered to their clients. Many financial intermediaries have recognized that they can no longer purchase funds using old financial instruments. To survive in the new economic environment, financial institutions had to invent and develop new products and services that customers would want and prove to be profitable. This process was called financial engineering. Thus, necessity was the mother of innovation.

Even owners of companies not affected by the financial revolution realized; that these changes in the economic environment can be used to increase their well-being. They began searching for new profitable financial products and services. Their efforts produced many multimillionaires and pioneered many of the financial innovations we know today.

There are 3 main types of innovation: those caused by changes in demand parameters, supply parameters, and also caused by the desire to avoid restrictions in the market. Let's consider financial innovations caused by changes in demand parameters.

The most significant change in the economic environment in recent years that has altered the demand for financial products has been the increase in interest rate volatility. For example, in the 1950s, interest rates on three-month Treasury bills ranged from 1% to 3.5%; in the 70s from 4% to 11.5%. This inconsistency became even more pronounced in the 1980s, when the spread was 5-15%. Large changes in interest rates lead to either significant capital gains or losses; as well as increasing investment uncertainty. That is, there is always a risk of not getting back the money spent ( interest rate risk). And those fluctuations that we saw in the 70s and 80s. lead to higher levels of interest rate risk. As risk increases, we will expect an increase in demand for financial products and services that can reduce it. This change in economic conditions thus stimulates the search for profitable innovations that satisfy new demand; and also accelerates the creation of new instruments that reduce interest rate risk. There are many cases confirming this. For example, those that appeared in the 70s. futures market and options market; and the development of adjustable rate loans.

2.2. The impact of financial innovation on the country's economy

Thus, financial innovations can have both a positive impact on the country’s economy (development innovations) and a negative impact (crisis innovations). What to expect from the innovation? – this question interests many economists and financiers. The answer to this requires an economic analysis of financial innovation. But this is not the only problem. Innovation requires money and investment. Venture capital investments most often go towards anything but high-tech businesses. According to experts, only about 1% of venture investments in Russia goes into the development of high technologies. Venture investors prefer quieter areas of capital investment. The reluctance to support Russian innovations is understandable in principle. Some explain this by the techno-nationalism of foreign venture funds, their fear that Russian innovations could challenge Western industrial leaders in certain regional markets. Allegedly, projects in “traditional” industries are focused mainly on the domestic market, and high-tech projects are most effective only if they are exported to international markets. Such thoughts are certainly gratifying for a patriot of Russian science.

It is also known that Russians still love “iron men”, prefer tradition to innovation, unity to pluralism, government decisions to personal choice.

Conclusion

Summarizing some of the above, it should be noted that within the framework of this work it is virtually impossible to cover all the provisions and problems associated with financial innovation.

Financial innovations are not planned by any centralized bodies, but arise as a result of the actions of individual entrepreneurs and firms. The main economic motives that stimulate the emergence of innovations in the financial sector are, in essence, no different from the motives operating in any other areas of human activity. As Adam Smith noted, “Every individual strives to employ his capital in such a way as to produce the greatest profit. His intentions, as a rule, do not include serving the public interests; he usually does not even know how much he contributes to their satisfaction. He cares only about his own safety and profit. But the individual, seeking exclusively for his own benefit, is guided by an invisible hand to a result that was not his intention. By following his own interests, he often contributes to the development of society much more effectively than if he really intended to do so.”

The fact that thanks to the introduction of credit cards, international travel has become much more convenient and cheaper is beyond doubt. Their invention and dissemination benefited millions of people and contributed to the “democratization” of finance.

How did it happen? The abstract answers this question in the first chapter, revealing the prerequisites for the emergence of financial innovation. The work presents examples that help not only to better understand this topic, but also to clearly understand the importance and necessity of financial innovation.

Credit cards are just one example of the huge number of financial products that have been developed over the past 30 years that have fundamentally changed the way people operate in the economic sphere. Taken together, these innovations have significantly increased the ability to effectively balance risk and return, manage personal investments wisely, and more accurately adjust individual needs throughout life, including saving during working years and using them in retirement.

The work showed that financial innovation is an independent economic category that has an impact on the financial sector of the economy, which is the task of the abstract.

The goals set at the beginning of the work have also been realized: firstly, the concept of financial innovation, its essence and prerequisites are revealed, secondly, an economic analysis of financial innovation is provided, and the impact of the phenomenon under consideration on the country’s economy is revealed.

For the development of financial innovations and their full use, it is necessary to improve general economic and financial education in Russia, increase the quality level of scientific research and the efficiency of the financial and credit system, which require an increase in the production of scientific and educational literature, in which, at a high professional level, but at the same time, foreign experience in scientific research, education and management of financial institutions would be covered in a simple and accessible way.

Bibliography

1. Balabanov I.T. and others. Money and financial institutions. - St. Petersburg: Publishing House “Peter”, 2000.
2. Balabanov I.T. Innovation management. - St. Petersburg: Publishing house “Peter”, 2001.
3. Melnikova T.I. Financial management: Reader. - Novosibirsk: SibAGS, 2001.
4. Financial innovations: Foreign experience / M.V. Lychagin, B. Scott-Quinn, V.I. Suslov. – Novosibirsk: Science, 1997.
5. E. Jamai. Problems of optimizing resource support for R&D in modern economic conditions // Director's Consultant, No. 5 (137), 2001.
6. Russian newspaper. 1998, January 15.
7. Russian newspaper. 1999, April 29.
8. Financial innovations /
9. “Stable Russia is just a mask” Washington Times, 2003 /

APPLICATION

Table 1.

Innovative characteristics of the financial market

Russian Federation

Financial assets of the market

Existing on the market

Possible financial innovations

financial products

financial operations

new financial products

new financial operations

1. Foreign exchange market

Securities in foreign currency

1. Reserve currency: British pound sterling, US dollar, German mark, Swiss franc, Japanese yen 2. Other freely convertible currencies: Australian dollar, Austrian schilling, Belgian franc, Dutch guilder, Danish krone, Spanish peseta, Italian lira, Canadian dollar, Kuwaiti dinar, Lebanese pound, Norwegian krone, Singapore dollar, French franc, Finnish mark, Swedish krona, Egyptian pound, Portuguese escudo, Greek drachma, Irish pound, Icelandic krona, Turkish lira, Czechoslovakian koruna, SDR, euro 3. Traveler's checks: American Express

1.Currency report 2. Currency deport 3. Currency arbitrage 4. Interest arbitrage 5. Hedging 6. Accounting credit by currency 7. Factoring by currency 9. Forfeiting 10. Credit on an open account 11. Acceptance credit 12. Acceptance-reimbursement loan 13. Financial loan by currency

A new type of reserve currency A new type of freely convertible currency New types of securities in foreign currency: foreign currency bonds for the population Swaption

Currency interest rate swap Zero coupon swap Swaption operations Swap warehousing Operations under the FRA agreement

Diners Club International, etc. 4. Euro checks from credit institutions in the UK, Italy, the Netherlands, France, Germany, Austria, Andorra, Belgium, Denmark, Spain, Luxembourg, Norway, Portugal, Finland, Sweden, Switzerland 5. Foreign exchange shares, bonds, bills, options, futures 6. Currency swap contract 7. Forward currency contract 8. Loan agreement (agreement) on currency

2. Market of precious metals and precious stones

2. Silver; 3.Platinum; 4. Platinum group metals: palladium, iridium, rhodium, ruthenium, osmium; 7.Emerald; 8.Sapphire 9.Alexandrite; 10. Pearls: oriental, fresh, round, weighing more than 0.25 carats; 11. Amber

Standard gold bars Standard silver bars Standard platinum bars Measured gold bars weighing 10, 20, 50, 100, 500 and 1000 g Precious metal coins Natural gemstones Gold swap contract Unique amber formations - Unique precious nuggets

Metal account transactions Collateral transactions Swap with gold

1. New precious metal coins 2. New commemorative medals made of precious metals

1. Operations with natural gemstones

metals Unique nuggets of precious precious stones

3. Securities market

Stock securities: share, bond, warrant, option, futures Other types of securities: bank certificate, government treasury obligation, bill of exchange, bill of lading Commercial securities: check, letter of credit, payment order

Share: ordinary, preferred, “golden”, type “A”, type “B”, convertible Warrant, share or bond certificate, double warehouse receipt (consists of 2 parts) Bank certificate of deposit Savings certificate State treasury obligations; Bill of lading; Bonds: International (external) loan, State internal loan of the RSFSR 1991, government short-term zero-coupon bonds, Federal loan, Gold federal loan 1992, municipal bonds, bonds of economic entities (banks, joint-stock companies, etc.), convertible Bond swap contract, check, letter of credit, payment order

Arbitrage deal Loan secured by securities Pawn loan Transfer of a bill, check, bill of lading using endorsement Protest bill Domiciliation of a bill Collection of bills Aval bill, check Acceptance of bill, check Swaping

Shares of new joint stock companies Government non-market coupon bonds

Electronic transactions with stock securities based on the “client-service” principle (interactive investing) Rent of interest income on a bond Novation on government zero-coupon bonds Novation on federal loan bonds with constant and variable income Zero coupon swap (on bonds) Arbitration “Cash-and-curry”

4. Money market

Bank account agreement Deposit agreement Short money swap contract Property trust management agreement Bank payment card Types of cards: credit card; debit card; smart card Discount card

Buying and selling money at auction Trust operations (trust management)

Agreement on the account of non-state educational institutions New types of agreements on bank accounts

New types of bank deposits Operations combining current account with overdraft Debt corporatization

5. Credit market

Credit resources (borrowed capital) in rubles)

Loan agreement (agreement) Mortgage Collateral certificate Loan agreement Bank credit card

Financial loan: fixed-term current account, call, mortgage Commercial loan: corporate, bill of exchange (accounting), factoring, overdraft

New types of loan agreement New types of loan agreement

Microcredit for pensioners Loan against future receipt of goods or money

6. Insurance market

1.Insurance certificate (policy) 2. Medical insurance policy 3.Pension policy

1.Certificate of insurance (or insurance policy) 2.Individual agreement for additional pension provision 3. Medical insurance policy (individual)

1.Insurance: personal, property, liability 2. Obtaining a loan against insurance

1. Compulsory liability insurance for vehicle owners 2.Insurance of new

borrowers' liability for non-repayment of loans

1.Insurance policies of foreign insurance companies 2. Group insurance policies on mutual insurance

types of liability 3.Title insurance 4.Insuring the walls of the building (i.e. the shell of the apartment) against destruction 5. Property insurance of enterprises based on the principle of preferred risk (i.e. mutual risk insurance)

7. Real estate market

1.Land 2. Subsoil area 3.Separated water bodies 4. Sea area 5.Forest area 7.Construction 8.Enterprise 9.Apartment 10. Aircraft, sea vessels and inland navigation vessels subject to state registration 11.Space objects

1.Types of real estate 2.Real estate appraisal certificate 3. Certificate of ownership

1.Real estate valuation 2.Purchase and sale of real estate 3.Real estate rental

1. New types of real estate (a plot of the Moon, land plots and subsoil plots in Antarctica, etc.)

1.New types of rentals (rental of a sea area, cave, mountain, etc.) Operations with debtors’ real estate and confiscated real estate (these are objects of the new financial debt market that has just begun to develop in Russia

Financial innovation is the end result of an innovation process in the financial sector, implemented on the financial market in the form of a new or improved financial product, as well as in the form of new financial transactions (i.e. actions). TO financial transactions include new forms of control and accounting, planning methods, analysis techniques, forms of financial work in an economic entity, actions to capture new financial markets, etc. The operation has an intangible (intangible) form, i.e. it cannot be touched.

Financial product represents a material part of a completed financial service or operation of a financial institution (bank, insurance company, stock exchange, investment fund, etc.).

Product is a document that has a tangible form. The financial product is presented in the form of a payment card, agreement, security (documentary forms), instructions, etc.

The composition of financial innovations is presented in Fig. 16.1.

What is new manifests itself as a new product only if it is sold on the market. Strictly speaking, the functioning of the financial market and the attitude of buyers towards a product determine whether a given product is new or not, what is the demand for it, which groups of people purchase it?

If a product that appears on the market is in demand and is sold well, it means that there are consumers for this product, and, therefore, it is really

a new, necessary financial product.

Any new phenomenon over time turns into an ordinary, traditional mass phenomenon.

Therefore, a financial innovation cannot be considered a product or operation that is new only for a specific financial institution, but which has already been implemented in other Russian financial institutions.

Financial innovation, like any other innovation, is closely related to time and in this regard, innovation can be considered a function of time. Financial innovation has its own lifespan and is often quite short. The lifespan of a financial innovation, like any other product (goods, services, tourism products, etc.), is expressed by the concept of “life cycle”. A cycle (Greek kyklos - circle) is a set of interrelated phenomena, processes, works that form a complete circle of development over a certain period of time.

Rice. 16.1. Composition of financial innovations

Life cycle of financial innovation— the time during which this innovation becomes a mass phenomenon. For example, the life cycle of a new type of loan is determined by the period of time from the date of its development by a given bank to the date of its implementation by other banks.

Financial innovations include:

· a new financial product that first appeared only on the Russian financial market;

· a new financial product that appeared on the Russian financial market, but has long been sold in the financial markets of other countries;

· new financial transactions (actions).

A distinctive feature of the development of modern international finance is the global nature of interaction, which is ensured through the introduction of financial innovations. Under financial innovation refers to the emergence of new financial products, technologies or organizational forms of business that reduce the costs and (or) risks of economic agents. Globalization of financial market products means the convergence of price and quality of the same financial product. The standardization and flexibility of capital flows has brought about profound changes in the financial world. New financial technologies are emerging that take the form of global financial strategies of corporations, global electronic financial networks, a global information support system, etc.

A prerequisite for the emergence of modern financial products is modern information technology. Innovations in the monetary and financial markets are accompanied by progress in computer technology. Modern financial systems cannot be imagined without a computer. With its help, trading is carried out, effective accounting is maintained, payments are made in a timely manner and transactions are regulated, data is collected in real time, large-scale processing is carried out, and decisions are made taking into account market conditions and managing the market situation. Computers are used to model the behavior of financial securities and major market indices, estimate the value of financial instruments and find combinations of these instruments that can provide a return commensurate with the chosen level of risk.

Everywhere, the means of communication between foreign banks and exchanges is telex computerized communication. Nowadays, the SWIFT computer system is widely known and popular - this is an abbreviation of a Swiss company, which stands for Society for International Interbank Financial Telecommunications.

Another important innovation in the organization of international payments is the CLS (Continuous linked settlement) payment system, which is an international system of foreign exchange transactions. This payment system was created by leading dealers of the foreign exchange market (the so-called “Big Twenty”) in 1997 and represents one settlement bank - CLS Bank. Since November 2002, 67 large financial institutions from 17 countries have become its shareholders. Initially, the bank serviced settlements in seven leading currencies: the US dollar, euro, Japanese yen, British pound sterling, Swiss franc, Canadian and Australian dollars. Later they were joined by the Swedish, Norwegian and Danish kroner, Hong Kong, New Zealand and Singapore dollars, as well as the Israeli shekel, South African rand, South Korean won, and Mexican peso. According to the Bank for International Settlements, CLS accounts for more than 55% of all international foreign exchange transactions. On average, CLS settles 579,000 foreign exchange transactions each day, totaling $3.3 trillion. In 2008, for the first time in its history, CLS completed more than 142 million foreign exchange transactions totaling $1 quadrillion.

The classification of some particularly important financial innovations is given in Table. 11.3.

Table 11.3

Classification of financial innovations (but K. Perez)

Type of financial innovation	Characteristics and examples of innovations
	Financial instruments for promoting technological innovation (venture financing)
	Financial instruments that ensure the expansion of technological innovation (corporate bonds)
	Modernization of financial technologies (Internet banking, ATMs)
	Financial instruments to attract mass investors (ΙΡΟ, mutual funds)
	Financial instruments for refinancing and asset mobilization (swaps, issuing bonds for share repurchase)
	“Controversial” innovations (tax havens, off-balance sheet transactions with financial instruments, “high-order” derivatives (separated from underlying assets)

Venture funding is a type of monetary capital that arose under the influence of the system of subsidizing research work on individual projects and programs. In fact, venture financing can be characterized as a source of long-term investment, usually provided for 5-7 years to enterprises in the early stages of their formation, as well as existing enterprises for their expansion and modernization.

Venture financing has a number of features:

• 1) it is impossible without the principle of “approved risk”. This means that capital investors agree in advance to the possibility of loss of funds if the financed enterprise fails in exchange for a high rate of return if it succeeds;
• 2) this type of financing involves long-term investment of capital, in which the investor has to wait on average from 3 to 5 years to be convinced of the prospects of the project, and from 5 to 10 years to receive a profit on the invested capital;
• 3) risk financing is placed not as a loan, but in the form of a share contribution to the authorized capital of the venture. Newly founded enterprises, as a rule, enjoy the legal status of partnerships, and capital investors become partners in them with liability limited to the size of the contribution. Depending on the share of participation that is agreed upon when providing money, risky investors are entitled to a corresponding receipt of future profits from the financed enterprise;
• 4) a venture entrepreneur, unlike a strategic partner, rarely seeks to seize a controlling stake in the company. Usually this is a stake of about 25-40%;
• 5) a high degree of personal interest of investors in the success of the new enterprise. This follows both from the high riskiness of the project and from the status of a co-owner of the venture being established. Therefore, risky investors often do not limit themselves to providing funds, but provide various consulting, management and other services to created ventures.

Financial instruments that ensure the expansion of the use of technological innovations include corporate bonds. Corporate bond – This is a security that certifies the loan relationship between its owner (lender) and the person who issued it (borrower). The latter is represented by joint-stock companies, enterprises and organizations of other organizational and legal forms of ownership. Corporate bonds dominate the structure of sources of financing for the economy, taking up more than 70% of all funds raised through the securities market. Their priority is determined by the long-term and constancy of property relations. In the market for the initial placement of corporate bonds, three groups of participants can be generally distinguished: issuer, underwriter and investor.

Issuer is the entity that issues the bond issue. The purpose of the issue is to attract borrowed funds to replenish working capital (short-term loans) or to finance a long-term project, for example, an enterprise modernization program (long-term loans). The issuer is interested in raising funds at the lowest interest rate for a long period. What is the attractiveness of issuing corporate bonds for the issuer? Unlike issuing shares, borrowing by issuing bonds has undeniable advantages. For example, corporate bonds make it possible, without changing or redistributing property, to provide enterprises with access to the capital market. The cost of placing bond issues depends on two components: the credit history of the issuer (development of the stock market for securities) and its creditworthiness (stable financial position). The reduction in borrowing costs is also the result of the development of the secondary bond market and increased investor confidence in the issuer.

Underwriters – these are financial structures that ensure the placement of the issuer’s bonds. Underwriting functions are performed by investment companies and banks. Several underwriters may participate in the process of placing securities, forming a consortium. Such a bond loan is called syndicated. The purpose of creating a consortium is to diversify the risks of underwriters in placing a bond issue (the number of potential investors increases due to the involvement of several underwriters with their own client bases in the placement process). Among the group of underwriters, the issuer selects a general manager who coordinates the placement of the issue and with whom the issuer sets the parameters of the upcoming issue (type of bond, maturity, interest rate, etc.). The general underwriter, as a rule, assumes the functions of the issuer's financial adviser for a given issue. Investors end up buying bonds. Corporate bonds are of interest to institutional investors who accumulate funds for a long time. The main volume of investments in corporate bonds today is carried out by banking structures, which account for 90–95% of the market. Corporate bonds are purchased by organizations to diversify their investment portfolio and as an instrument that allows them to obtain a return higher than on government securities. For active stock market players (investment companies), corporate bonds are of little interest due to the low liquidity of the secondary market. The next feature of this type of bond is that the company can create a “redemption fund” that will be used in the redemption process. This means that each year the company sets aside a certain amount of cash, which it uses to buy back some bonds on the open market. One consequence of using this approach (in accordance with the law of supply and demand) is that the lender will be willing to receive a lower interest rate.

Currently, the modernization of financial technologies (Internet banking, ATMs) is widespread. Internet banking – the general name for remote banking technologies, in which access to accounts and transactions on them is provided at any time and from any computer with Internet access. As a rule, Internet banking services include: account statements, provision of information on banking products (deposits, loans, etc.), applications for opening deposits, obtaining loans, bank cards, internal transfers to bank accounts, transfers to accounts in other banks, conversion of funds, payment for services.

Financial instruments for attracting mass investors (ΙΡΟ, mutual funds), financial instruments for refinancing and mobilizing assets (swaps, issuing bonds to buy back shares) will be described in more detail in Chapter 12.

Offshore activity is a specific international financial sphere. Thus, in recent years, from a third to a half of global cash flows passed through offshore centers; they served up to 50% of global capital flows. According to the US FBI, about $5 trillion is concentrated in the accounts of banks and investment companies registered in 42 offshore centers around the world.

The first offshore companies appeared in the 1960s, when former colonial states, having gained independence, began to provide tax benefits to non-resident companies in order to attract capital. Initially, offshore business was the prerogative of banking, but as international financial relations developed, other offshore structures began to appear - insurance, investment, etc. As a result, in the 1990s. a real boom in offshore business began. Offshore zone (offshore area) - a territory in which the most favored nation monetary and financial regime has been established (preferential taxation, free export of profits, soft currency regulations, customs benefits for foreign investors). A low authorized capital threshold also plays a significant role for a potential offshore client. It is often only declared, but not actually paid. Offshore income tax is less than 5% or is replaced by a small (up to $1,000) contribution that does not depend on the amount of income.

Offshore is also attractive for its stability. As a rule, in such financial enclaves the stability cycle extends for 10–25 years, i.e. the company owner can be sure that during this period there will be no unforeseen adverse changes in the political system, legislation and macroeconomic trends in the offshore he has chosen. The identities of company owners are not disclosed, and the registration procedure is simplified as much as possible. However, according to the law, the anonymity of investments can be disclosed in the event of criminal prosecution of the person. The fact of ownership is hidden by the use of the services of either nominee directors or shareholders on a fiduciary basis. Companies are often not required to report on accounts, tax returns, or external audits. Company accounts can be verified only by decision of the owners. The only practiced form of reporting for many companies is the annual balance sheet.

Reference. The total number of offshore zones in the world is determined very roughly. The process of their emergence and disappearance is relatively dynamic. Experts currently name about 100 stable, integrated offshore centers where offshore companies traditionally operate. Of the European centers, the most famous are Gibraltar, Liechtenstein, Andorra, Monaco, Cyprus, Malta, etc.; in Central America - Panama, Costa Rica, Bermuda, Virgin, Cayman, Bahamas, Barbados, Antigua and Barabuda, as well as the islands of Turkey and Cayox, Aruba, Curacao; on the African continent, the largest offshore zones are Liberia and Mauritius; in the Pacific region - Nauru, Fiji, Western Samoa; in Southeast Asia - Hong Kong (until recently) and the Malaysian island of Labuan; in the Persian Gulf area - the Sultanate of Bahrain.

The most actively used offshore centers by Russian participants in foreign trade activities are the Isle of Man, Jersey, Guernsey, Virgin (British) Islands, Delaware (USA), Liechtenstein, Malta, Cyprus, Singapore, and Ireland.

Currently, the following legal forms of offshore activity (jurisdiction) have become widespread: tax havens; countries with preferential tax regimes; offshore territories.

States that waive or impose a fixed fee for company registration (usually no more than $1,000 per year) are called tax havens. They provide offshore status, i.e. certain tax incentives to extract maximum benefit from a combination of opportunities: geographical location, intellectual capital, etc. In the absence of natural resources and conditions for industrial development, the most effective way to revive business activity and attract foreign capital is the practice of tax incentives. As a rule, these are island states: in Europe - the Isle of Man, Gibraltar (22 thousand companies), the islands of Guernsey, Jersey (Great Britain), Malta, etc.; in Africa - Liberia, Mauritius; in the Pacific basin - Western Samoa, Fiji island; in Central America and the Caribbean - Panama (120 thousand companies), Costa Rica, Virgin (British) Islands (20 thousand companies), Bermuda, Turke and Cayox Islands.

In countries with preferential tax regime (they are also called centers of offshore companies) there is also no currency control, but customs and tax restrictions remain. It is in these countries that there has recently been a significant increase in the number of offshore companies. They typically maintain high tax rates for their own companies, which cannot avoid them, and preferential rates for foreign investors to attract them. These countries combine low taxes with a network of double tax treaties. For the most part, this group includes the states of continental Europe - the canton of Geneva (Switzerland), Luxembourg, the Netherlands, etc. Very often, benefits are provided to companies with a specific type of activity. For example, in Luxembourg it is profitable to create a non-resident holding company. An interesting country in terms of taxation is Switzerland, which is considered a country with a high level of taxation. However, due to the fact that the Canton of Geneva has reduced the cantonal tax rate for some companies, it is advantageous to establish companies with a financial profile there. While financial businesses are strictly licensed throughout the world, in Geneva this type of activity does not require special procedures from founders. Companies established in countries with preferential taxation are more prestigious and creditworthy than firms from flat tax havens, but they are also more complex to manage.

The third group includes administrative-territorial entities in which the offshore regime operates, although they themselves are part of the state, so they can be called offshore territories. Basically, such formations are typical for countries with a federal structure. Offshore territories include the states of Delaware, Wyoming, Nevada in the USA; Kalmykia, the ecological-economic region "Altai" in Russia, etc. What is characteristic of such an offshore jurisdiction is that it can serve as a tax haven in the case of international business and at the same time allows for offshore financial and economic transactions without going beyond the national ones borders of one country. Indeed, federations are characterized by three levels of taxation: federal, regional and local. As a rule, tax benefits are provided to enterprises that are registered in an offshore territory, but operate and receive income outside of it.

Offshore companies are characterized by the following main features: their owners are foreign legal entities or individuals (non-residents in relation to the legislation of the country of registration); they do not have the right to carry out production and commercial activities in the country of registration. Such companies have tax benefits when carrying out foreign exchange, credit and financial activities. Offshore companies are registered in one country, but the subject of their activities is located in other countries. Moreover, all international financial transactions pass through offshore territory.

Any offshore company, regardless of place of registration, is strictly defined by law structure. From a legal point of view, offshore companies are most often closed joint-stock companies. The authorized capital varies from 2 to 50 thousand dollars. There is no need for full payment of capital; there is the concept of “partially paid capital”. In practice, this means that by purchasing two or three dollar shares, such an “owner” can control an offshore company. Each offshore company must have a secretary, whose role is played by a specialized secretarial company. Local authorities require that an offshore company have a secretary from local citizens or legal entities who actually monitors the current activities of the company. The secretary's responsibilities include preparing documentation (except accounting) for local authorities, fulfilling all legal conditions to ensure the life of an offshore company and monitoring the timely payment of annual fees. According to Oftshore Express magazine, there are now almost 3 million offshore companies in the world.

Offshore activity is one of the most controversial forms of international financial relations of private companies. Using the mechanism of tax minimization, it essentially balances between legal tax planning tools and criminal evasion of mandatory budget revenues. Today, offshore business has, unfortunately, become a natural practice of maintaining taxable profits abroad and “laundering” illegally earned money. States, trying to protect their interests, establish various restrictions on conducting offshore business. Most developed countries have created tax barriers to the transfer of income to tax havens. Such countries are reluctant to sign tax agreements with states that provide income tax benefits. As a consequence, when declaring the transfer of income to a tax haven, the income is taxed in full. A particularly negative attitude towards offshore activities emerged after the terrorist attack on September 11, 2001 in the United States. Offshore companies and banks began to be considered by the international community as possible channels for financing terrorist organizations. Therefore, proposals have emerged, if not for the complete elimination of offshore business, then at least for increasing the transparency of the activities of offshore companies. Thus, due to the opposition of many states, there is a general reduction in the scope of offshore activities.

A serious blow to the popularity of offshore business in the world was dealt by the debt, financial, budgetary and economic crisis in the Republic of Cyprus, which in March 2013 led to the paralysis of the country's banking system and plunged its economy into a pre-default state.

Reference. Cyprus joined the eurozone on January 1, 2008. Due to the deterioration of macroeconomic indicators in the world, a gradual deterioration in the economy of the Greek part of the island began, which coincided with the deterioration of economic indicators in other countries on the periphery of the euro area. At the same time, bank interest rates on deposits in Cyprus (+4.45%) are several times higher than interest rates in the same currency in Germany (+1.5%); about 55% of deposits in the system contain an amount exceeding 100,000 euros, about a third of all foreign deposits are Russian. These high interest rates were paid mostly by new depositors, i.e. there was a financial pyramid. These and other problems brought the republic's economy closer to collapse, and the country faced the need to receive financial assistance from international creditors.

At the next meeting of the Eurogroup, it was decided to introduce a one-time tax on all bank deposits in the country as a prerequisite for receiving assistance. By this time, the share of capital contained in the banking sector of the Republic of Cyprus reached 835% of the size of the Cypriot GDP. Almost a third of all deposits in Cypriot banks belonged to foreigners. The final anti-crisis plan, after negotiations with leading EU countries, includes an unprecedented measure where deposits of more than 100,000 euros will be taxed. At the same time, the losses of large depositors will vary depending on which bank their deposits were placed in. In addition, the country's largest bank, Bank of Cyprus, will be restructured, and the country's second largest bank, Cyprus Popular Bank, operating under the Laiki Bank brand, will be liquidated. The losses of its investors, as well as the size of layoffs, have not yet been determined. Although the initial total volume of the national anti-crisis plan was 5.8 billion euros, it is expected that, taking into account the increase in corporate income tax from 10 to 12.5%, as well as the introduction of a tax on interest income on bank deposits, it will be able to reach the ultimately required value of 7 billion euros. Experts view restrictions on capital movements as an actual exit from the eurozone, and bank holidays and the impossibility of withdrawing deposits as an actual default.

Source . URL: ni.wikipedia.org/wiki.

Introduction

Chapter 1. Theoretical aspects of the development and use of innovations in financial markets 13

1.1. Economic essence of innovation 15

1.2. Financial market as an environment for innovation 28

1.3. Factors shaping innovation in financial markets 48

Chapter 2. Main directions of development of innovations in financial markets 68

2.1. Types of financial innovations 68

2.2. Credit derivatives 84

2.3. Asset-backed securities 104

2.4. American Depository Receipts - ADR 112

Chapter 3. Opportunities for using financial innovations in Russia 128

3.1. Factors in the development of financial innovation in the Russian economy 128

3.2. Prospects for the development of specific types of financial innovations in the Russian economy 150

3.2.1. Scope of application and main problems of using credit derivatives in Russia 150

3.2.2. Possibilities of using asset-backed securities in Russia 163

3.2.3. Problems and prospects for the development of the depositary receipts market in Russia 173

Conclusion 188

Applications 203

Appendix 1. Calculation of forecast volumes of the OTC market

derivative financial instruments 203

Bibliography 208

Introduction to the work

Relevance of the research topic. The current stage of development of global financial markets is associated with the emergence of new derivative financial instruments that provide opportunities previously unavailable in the market of cash assets, allowing to effectively regulate market risks, create the desired risk profile, and carry out operations to diversify and insure portfolio risks. This is very relevant for Russia, where hedging problems have traditionally been particularly acute.

The Russian financial market, unfortunately, lags behind developed countries in terms of the level of development of innovative tools and technologies. However, this only creates additional incentives for Russian specialists to pay attention to innovative activities in the financial sector - financial innovations can play a significant role in the development of the Russian financial market and the economy as a whole.

Thus, the relevance of this work is primarily due to the fact that innovative activity in the Russian financial market has enormous unrealized potential. This potential is especially significant due to the fact that international practice is rich in ready-made innovative developments that have proven their effectiveness. In other words, Russian specialists have a ready-made set of tools on hand, the adaptation of which to Russian conditions can bring undoubted benefits to the domestic economy.

The relevance of the topic we have chosen is also due to the fact that Russian financial institutions, government bodies and private companies actively use developments and solutions in financial

spheres that foreign firms and banks and international organizations have. Knowledge of this experience is the basis for its competent application in Russian conditions, as well as the successful activities of Russian participants in the global market. Thus, we see here a simultaneous merging of scientific interest in the problems noted above with the possibility of practical application of research results on this topic.

It should be said that the above problems became the object of study by both foreign and Russian scientists relatively recently (no more than 10-15 years ago), and therefore there are still quite a lot of unresolved issues in this direction. If we take into account that the dynamically developing processes of globalization in the world economy constantly raise new questions, then the relevance of studying the mechanisms of the financial market, as well as the place and role of Russia in this market, is quite obvious.

The degree of development of the problem. Certain aspects of the topic under consideration were covered in the works of domestic and foreign researchers devoted to the study of theoretical and practical aspects of the functioning of financial markets. For example, in the works of J. Schumpeter, the essence and role of innovation is defined for the first time. A number of researchers, such as Mandelbrot B., Knight R., Hodgson J., Nelson R., Winter S, Yakovets Y. and others, to varying degrees and from different positions, viewed innovation as an important factor in economic development. Marshall J., Bansal V., Sinkey, J. touched on certain aspects of the use of financial innovations, including financial engineering products. Among domestic economists developing theoretical, methodological and practical aspects of the use of financial innovations, primarily derivatives, one should

to name Bocharov V., Vaina S., Kavkin A., Lobanov A., Mikhailov D., Nozdrev N., Solovyov P., Feldman A., however, comprehensive studies on this issue have not been conducted. In addition, there are significant differences in conceptual and methodological approaches to the development of the topic under consideration.

The purpose of the study is to identify factors that impede the development of innovation in the Russian financial market, as well as to develop practical recommendations for the successful use of innovative tools and technologies in Russia. To achieve this goal, the following tasks were formulated:

define the concept and reveal the economic essence of “innovation” and “financial innovation”;

formulate classification characteristics of innovations;

identify and analyze factors contributing to the formation and spread of innovations in financial markets;

develop a model of the genesis and diffusion of innovations in financial markets;

identify the features of the development of the Russian financial market in order to determine the most promising types of financial innovations from the point of view of practical application;

to study the possibility of practical application of innovations in the Russian financial sector and develop practical recommendations for their successful implementation.

The object of this study is the financial market as a specific sphere of economic relations in general and the Russian financial market in particular.

Subject of research are economic relations between subjects of the financial market and its individual segments regarding the creation, implementation and application of financial innovative technologies, as well as objective patterns of the emergence and spread of innovations in modern conditions of financial markets.

Theoretical and methodological basis of the study are the fundamental provisions of economic science, the theory of investment and innovation management, as well as a systematic approach to the object and subject of research. In addition, in the process of working on the dissertation, the author used classical methods of scientific research, based on the use of scientific abstraction, logical, functional and systemic analysis and synthesis, induction, deduction and dialectics. To solve the problems posed in the work, official materials from government agencies, periodicals and scientific publications were used. The work uses tabular and graphical methods, as well as mathematical methods of economic analysis. The use of these methods made it possible to achieve significant results, in particular, to develop scientific definitions, develop and describe theoretical models, and develop practical recommendations.

The information base of the study consisted of regulations of the Russian Federation, the Ministry of Finance of the Russian Federation, the Central Bank of the Russian Federation and the Federal Service for Financial Markets, publications of international financial organizations, articles and information and statistical materials of domestic and foreign periodicals on the issues under consideration, as well as relevant sections of official Internet sites.

Scientific novelty of the dissertation research is to develop a model of the innovation process in the Russian financial market, allowing one to identify and integrate into it adequate instrumental technologies.

The following provisions containing elements of scientific novelty are submitted for defense.

It has been proven that financial innovation is a financial technology that provides a more efficient redistribution of financial resources, profitability, risks, liquidity and information in order to extract additional profit from such redistribution, but has not yet become widespread in a particular market. This definition allows us to consider innovations in the context of the characteristics of a particular market in order to more accurately separate innovative technologies from non-innovative ones.

The relationship between the intensity of development of financial innovations, grouped by their functional characteristics, and predicative factors that most actively influence a specific functional group of financial innovations has been determined, which could allow government bodies to carry out proactive rule-making activities in relation to financial markets, based on medium- and long-term forecasts of the state of the latter.

A detailed classification of innovations in financial markets has been carried out, allowing them to be structured according to the following classification criteria: by functionality, by level of novelty, by areas of implementation and

causes of occurrence, which helps to identify systemic relationships between them.

A process model of the genesis and diffusion of financial innovations has been developed, separating autonomous and induced innovations, which makes it possible to establish a connection between the emergence of autonomous innovations and the initial emergence of a new idea, and induced innovations with the need to solve problems arising as a result of changes in market conditions. It has been proven that the possibilities and speed of bringing autonomous innovations to the market depend on the level of transaction costs, and induced ones - on the features of regulation.

It has been revealed that financial innovations are mainly of an induced nature, that is, they arise as a reaction to changes in the operating conditions of an economic agent, which makes it possible to predict the emergence of certain types of innovations. At the same time, most of the implemented financial innovations are complex, multi-purpose in nature, expressed in the multiplicity of ways of their application, which leads to their wide and rapid distribution in the market.

It has been proven that credit derivatives are structured financial instruments that separate credit risk from an asset for subsequent transfer to another party and allow the risk and asset to be traded separately, taking into account the credit risk profile. This made it possible to more clearly limit the range of instruments included in this category.

The work was carried out in accordance with clause 9.10 “Financial innovations in the banking sector” and clause 9.16 “New banking products: types, technology

creation, methods of implementation" Passports of the specialty 08.00.10 - Finance, money circulation and credit.

Practical significance of the study. The provisions formulated in the dissertation research contribute to the further development of certain issues in the theory of financial markets and its segments. The results of the dissertation research allow us to determine directions for improving public policy in order to stimulate the innovation process in financial markets.

The most significant results can be used by the Central Bank of the Russian Federation, the Federal Service for Financial Markets, as well as specialized committees of the State Duma of the Federal Assembly of the Russian Federation for the purpose of improving state policy in the field of innovative management in financial markets. They will also make it possible to overcome the main obstacles to the spread of financial innovations in Russia and more actively use innovative products in the financial sector (investment and banking activities) and in the non-financial sector of the economy.

The provisions and recommendations formulated in the work make it possible to take into account the peculiarities of the modern operating conditions of the Russian financial market when making decisions in the field of financial management, and to more effectively use innovative products as risk management tools by Russian banks and financial companies, as well as organizations in the non-financial sector of the economy.

The results of the study can be used by credit institutions, financial and investment companies, enterprises

in the development and implementation of non-standard methods for managing cash flows and risks of various types.

In addition, the results of the study can be used in the educational process when training specialists in the field of finance and banking, stock exchange specialists, financial managers of enterprises and organizations, including venture capital ones.

Testing of results and publications on the topic of the dissertation. The main provisions and results of the study were presented at the international scientific and practical conference “Finance and Accounting: Regional Aspects” in Almaty (Kazakhstan), and also presented at the III International Scientific and Practical Seminar on the Problems of Transformation of the Modern Russian Economy (Moscow , December 5-7, 2004), were discussed and approved at a joint meeting of the Department of World Economy and International Finance and the Department of Finance and Credit ATiSO, at meetings of the Student Scientific Society ATiSO.

Certain provisions of the study were practically tested in the activities of the non-state pension fund “Norilsk Nickel”.

The dissertation materials and research results were used in teaching practice when delivering a course of lectures and conducting seminars within the disciplines “World Economy” and “International Monetary Relations”, special courses on financial risk management at the Russian Economic Academy named after. G.V. Plekhanov, Academy of Labor and Social Relations, in addition, certain results of the study were used in the development of curricula for courses

“International monetary relations”, “Foreign exchange transactions”, “Financial markets”.

Dissertation structure includes an introduction, three thematic chapters defining the logic of setting and solving problems, a conclusion with the main conclusions, a list of publications used, as well as Appendices.

Economic essence of innovation

Existing innovation concepts do not allow a complete and accurate definition of the term “innovation” itself, and do not provide a solid basis for developing a classification of innovations (“financial innovation” as a component), as well as the factors influencing their emergence.

There is no single interpretation of innovation in the economic literature. However, two approaches to understanding this term can be distinguished: narrow and broad. The narrow approach interprets innovation from a technical point of view and identifies it with industrial production, in particular with new equipment, technology, and products. With a broad approach, innovation is considered as a new product or service, a method of its production, an innovation in organizational, financial, research and other areas. The object of study of this work requires adherence to the second, broader approach.

The category of innovation first appeared in J. Schumpeter. By innovation he meant change with the aim of introducing and using new types of consumer goods, new production, transport means, markets and forms of organization in industry.1 Innovation as a tool for increasing the efficiency of social reproduction can relate both to the sphere of productive forces and to the sphere of industrial relations .

Innovation in the sphere of productive forces is primarily associated with the improvement of productive forces: means of production (means of labor and objects of labor) and consumer goods that are necessary for the reproduction of labor power. At the same time, intangible factors in the form of an innovative idea and discovery are also a necessary attribute of the emergence of material innovation.

Innovations in the sphere of industrial relations are based on the economic interests of the subjects of these relations and can relate to planning, organization, management, and control of industrial relations.

According to I. Schumpeter, innovation is the main source of profit: “in essence, entrepreneurial profit is the result of the implementation of new combinations”, “without development there is no profit, without profit there is no development”1. Thus, the first goal of innovation in most cases is to increase the efficiency of using available resources. Ultimately, every innovation must directly or indirectly enable the creation of value more efficiently. The second important goal is to use innovation as a product that can generate income for its owner.

Types of financial innovations

During the 80s. XX century International markets have been the site of the creation or development of a significant number of financial innovations. In an unstable global market environment due to the volatility of interest rates and exchange rates, investors and borrowers need to adapt to circumstances at any given time. They also seek to take full advantage of the benefits or gaps in tax laws. Financial innovation aims to best meet these needs. The international market is better predisposed to their rapid implementation than the national one, since it is free from the regulations inherent in national markets. This explains the fact that the international market plays a major role in the creation and promotion of new financial products, which, for practical reasons, subsequently develop in national markets.

During the 70s. XX century Euromarkets offered borrowers three main types of loans: short-term loans in Eurocurrencies to finance cash needs, directly modeled on the cash loans offered by banks in most major industrialized countries; medium- and long-term Euroloans (usually for a period of more than 18 months, but less than 15 years), formed within the framework of a banking pool (syndicate);

Eurobonds placed on international markets. Currently, the markets offer products that allow, through the development of securities, to provide any loan duration - from 24 hours to tens of years.

For the purpose of further analysis, it is necessary to classify the main financial innovations.

There are numerous criteria for classifying financial products of an innovative nature.

Depending on the underlying asset, new financial products are divided into foreign exchange, interest, index, stock and credit.

Depending on the mechanism for concluding a transaction, products are classified into exchange-traded and over-the-counter. For over-the-counter products, contract positions are not standardized, and market operators can change them with maximum flexibility based on the objectives of a particular transaction.

According to the duration of the contract, instruments can be short-term (up to one year), medium-term (from one year to five years) and long-term (over five years). The main share of operations falls into the first category. The most typical representatives of the medium- and long-term market segments are over-the-counter instruments and, above all, swaps.

According to the structural criterion, simple and complex financial products are distinguished. The former include such instruments as options, futures, swaps, securities for securitized assets and depository receipts. Complex ones include all kinds of hybrid financial instruments, combinations of several derivatives, instruments that combine one or more derivatives with financial assets, as well as derivatives for which the underlying asset is another derivative; Thus, a swaption is an option written on a swap.

According to the pricing mechanism, financial products are classified into arbitrage and probability. For the first, most numerous, group, prices are determined based on quotes from other financial products. The basis for pricing probabilistic instruments is the mathematical apparatus of probability theory.

Finally, by type, innovative financial products can be divided into two large groups - derivative financial instruments (or derivatives) and basic ones, the difference between which is that basic instruments have as the subject of a transaction a certain asset as such, while derivatives are an instrument written on another financial instrument - it makes no difference whether it is derivative or basic.

New (or re-emerging) financial products have had an extremely important impact on international and domestic financial markets over the past two decades. International experts identify four main groups of financial products that are innovative in nature and mainly related to derivatives.1 The instruments of each of them differ from the others both in form and in purpose of application. Together they demonstrate the extent of their penetration into all segments of financial markets.

Factors in the development of financial innovation in the Russian economy

Development of the Russian derivatives market.

For the first time, trading in futures contracts on the US dollar began in October 1992 on the Moscow Commodity Exchange (MTB). This event marked the beginning of the formation of the derivatives market in Russia. The scale of turnover during this period was insignificant (about 300 - 400 thousand dollars per day). Almost immediately, futures for other assets appeared (primarily for privatization checks).

A distinctive feature of the Russian model of development of the derivatives market is that the first contracts were financial futures. Also interesting is the fact that in the currency futures market there was a high percentage of transactions ending in the actual delivery of goods. If in world practice this figure does not exceed 1 - 2%, then in MTB in February 1993 transactions that resulted in the delivery of real goods accounted for 10% of the total turnover.

Subsequently, as larger and more reputable participants began to enter the market, primarily banks and investment funds, trading volumes began to increase and reached 2 - 3 million US dollars per day by the beginning of 1994. Liquidity has increased and market volatility has decreased, but dependence on other financial markets has not yet manifested itself.

In March 1994, the futures section was opened on the Moscow Central Stock Exchange (MCSE). From the very beginning, this exchange focused on a fundamentally different circle of participants - banks and financial structures, that is, large financial players. The ICFB began to use electronic trading technology, new to the Russian futures market, which is more convenient for large players. The turnover of the futures market (primarily the foreign exchange market) increased at a high rate due to the growing scale of speculative transactions. However, a large share of speculative transactions made the futures market very volatile.

The over-the-counter segment of the derivatives market remained at a low level of development, while the world market is dominated, as we saw above, by the over-the-counter segment of the derivatives market. The main reasons were the lack of a developed banking system and mutual trust in the interbank market (the main participants in the over-the-counter derivatives market are large banks); as well as the virtual absence of a regulatory framework regulating the relations of counterparties in derivatives transactions outside exchange platforms. Futures transactions were as simple as possible in structure (forwards) and were episodic in nature.

In 1996, a situation arose in the derivatives market when the interest of participants began to shift towards derivative instruments based on GKOs, as currency futures ceased to generate profit. At that time, this market was characterized by ultra-high profitability and, as it later turned out, an imaginary lack of risk. Stock futures are most widespread in Russia, in contrast to the world's leading futures markets, where the main futures contracts are stock index contracts.

By the end of 1997, the leader in the total volume of open positions was the MICEX. Trading in the US dollar, government bonds and stock index was almost completely concentrated on this exchange.

The turning point in the development and establishment of the derivatives market in Russia was the 1998 crisis. On June 1, 1998, the Russian Exchange suspended trading on all contracts, under the pretext that a number of participants were unable to fulfill their obligations. The collapse of the Russian Exchange occurred as a result of abuse of official powers by the management of the exchange. At this time, the derivatives market on the MICEX continued to develop. The admission of non-residents to the MICEX derivatives market on April 14, 1998 became a stabilizing factor in its further development. In addition, the management of the exchange developed measures to attract small and medium-sized participants in the derivatives market. On August 17, together with the moratorium on the repayment of external debt announced by the Government of the Russian Federation and the Central Bank of the Russian Federation, a restriction was introduced on transactions related to payments by residents to non-residents, including under fixed-term contracts for a period of up to 90 days. This meant a deep structural crisis, which could not but affect the derivatives market. Trading volumes fell sharply, and the confidence of participants was seriously undermined.

Innovative activity in the Russian financial market has enormous unrealized potential. What is everyday practice in the West has yet to be introduced and developed in Russia. At the same time, Russia does not need to invent and create new innovative financial instruments, since international practice is rich in developments that have been developed and improved over the years and have proven their effectiveness. In other words, Russian business entities have a set of tools and the ability to choose development paths, the adaptation of which to Russian conditions can bring undoubted benefits to the domestic economy.

Financial innovation - implemented in the form of a new financial product or operation, the end result of innovative activity in the financial sector, providing a more effective redistribution of financial resources, profitability, risks, liquidity and information in order to extract additional profit from such redistribution, which have not yet become widespread in a particular market.

• mandatory sale of a new financial product on the market of financial innovations;
• mandatory implementation of a financial transaction on the market or within an economic entity;
• functional dependence of financial innovation on time;
• features of the financial product itself, which are expressed in the presence of individual and mass demand, in the functioning of a limited and non-limited product, in the existence of a product in the form of property and in the form of property rights.

New financial products there are:

• mass - products without a clearly defined individuality, without special characteristic features, differing only in the types of products or financial assets and produced with investors and ordinary citizens in mind;
• single - individual products that have characteristic, unique features that set them apart from other products. They have a clearly defined circle of customers, therefore they are issued with specific consumers (investors) in mind;
• limited - shares, bonds, types of credit agreements, real estate, etc. - products, the volume (quantity) of issue of which is strictly quotas and established when releasing a product under the influence of many factors: the amount of the authorized capital of a business entity, customer demand, the availability of a unit of the product itself ( real estate objects);
• unlimited - coins made of precious metals, plastic cards, bank accounts, insurance certificates, pension policies - products, the volume (quantity) of issue of which is not limited by quotas. These products are produced with the potential buyer in mind. The number of buyers is not determined. Therefore, the volume of issue of unlimited financial products is not limited by rules and conditions, except for the factor of consumer demand.

New financial products may take the form of:

• property is a thing, a material object of ownership, for example money, measured gold bars, coins, precious stones, securities, land;
• property rights - the right to own, dispose and use certain property. A financial product in the form of property rights includes documents - a bank account agreement, a loan agreement, a pension policy, etc.

Financial transaction(from Latin operatio - action) - a procedure of action aimed at solving a specific financial management problem. Financial transactions as actions are intangible and cannot be touched like a thing, and therefore cannot be sold at a fixed price.

To sell a financial transaction, it must be materialized in the form of a thing. The form of materialization of a financial transaction are instructions, rules, guidelines, formulas, graphs, i.e. some specific document, which is a financial product, and therefore an object of purchase and sale on the financial market.

The emergence of financial innovation does not occur on its own, but due to many reasons:

• 1) volatility of interest rates and inflation rates, which have fluctuated significantly over the past decades, both nominal and real. To reduce the risks associated with these fluctuations, new financial products are being created;
• 2) regulatory changes. Since the early 1970s. Deregulation of the financial services market is rapidly developing. The limits that previously limited the activities of various financial institutions have been removed, and the arena of competition has changed dramatically;
• 3) changes in the field of taxation. If previously such changes occurred infrequently, now changes in tax legislation occur almost every year. Because they affect financial performance, new financial decisions and actions are required in response to changes in tax laws;
• 4) rapid development of information and computer technologies. Active informatization and computerization of the financial sector has entailed a constant expansion of the volume of financial services and a reduction in the cost of transaction costs;
• 5) changes in the economic cycle. There is more reason to introduce new financial products and processes during times of prosperity than during times of recession.

Financial products of an innovative nature are classified according to a number of criteria.

Depending on the underlying asset new financial products are divided into foreign exchange, index, stock and interest.

Depending on the mechanism for concluding a deal financial instruments are classified into exchange-traded instruments, which are strictly standardized and subject to the strict rules of the exchange, and over-the-counter instruments, in which contract positions are not standardized and market operators can change them as flexibly as possible, taking into account the objectives of a particular transaction.

By structural criterion distinguish between simple and complex financial products. Simple financial products include instruments such as options, futures, swaps, securities on securitized assets and depositary receipts. Complex financial products include all possible combinations of several derivatives, instruments that combine one or more derivatives with financial assets, as well as derivatives for which the underlying asset is another derivative. Such products are often the result of financial engineering, which can be described as the process of creating financial contracts that provide non-standard cash flows to solve specific FM problems.

Most financial innovations belong to the group of derivative financial instruments and initially become widespread in international markets, only later moving to national ones. The emergence and spread of financial innovations in national markets is hampered by restrictions and regulation of the work of market participants put forward by government regulatory bodies. International markets, free from such regulation, become “incubators” of financial innovations, which, after the formation of relevant markets, development of work practices in them and the emergence of contract standards, can be transferred to national markets.