We present a standard model of financial innovation, in which intermediaries engineer securities with cash flows that investors seek, but modify two assumptions. First, investors (and possibly intermediaries) neglect certain unlikely risks. Second, investors demand securities with safe cash...

Intro -- Contents -- Financial Innovation and Economic Crisis: An Introduction -- INVENTORS, PRODUCTS, AND INVESTORS IN FINANCE -- 1 Inventors in Finance: An Impressionistic History of the People Who Have Made Risk Management Work -- 2 Psychology and the Financial Crisis of 2007 - 2008 -- 3...