Disagreement-Based Trading and Speculation: Implications for Financial Regulation and Economic Theory
Accounting, Economics, and Law: A Convivium, Vol. 1, 2011
Posted: 14 Feb 2011
Date Written: February 14, 2011
Lynn Stout’s paper on Risk, Speculation, and OTC Derivatives: An Inaugural Essay for Convivium develops an insightful legal-economic analysis of speculative trading. From one hand, the paper discusses the legal-economic framework of speculation and its recent transformation, making reference to the case of derivatives markets crash (and related financial crisis) of 2007. From another hand, the paper foreshadows a thought-provoking economic model of trade (and speculation) based on disagreement, advocating further developments that take into account market manipulation and conflict of interest, whilst relaxing alleged assumptions (and beliefs) on universal fundamental value and perfect forecasting.
Keywords: economic theory, financial regulation, speculation, hedging, heterogeneous beliefs
JEL Classification: D53, D82, D84, G01, G28, K20, B10, C70, D14
Suggested Citation: Suggested Citation