Question

How can Financial innovations be decomposed to predict potential outcomes

Answer 1

Financial innovation can be defined as the process of finding and creating new financial products, services, or Investment processes which include working on updating the technology, better risk management, risk transfer, credit creation and procuring sources of equity generation and many more. This helps in predicting the potential financial outcomes; the risk associated with the investement can be derived and predicted up to a certain extent by the usage of new innovative tools and the decisions can be made on the basis of that. The risk can be decomposed in to tiny sections of relevant risk and the reward associated with it can be calculted which can help in predicting the possible outcomes.