Research on the Cumulative Effect of Financial Innovation by Chaos Model

Abstract

Based on an understanding and analysis of the complexity of a financial system and the chaotic features of its evolution, we focus upon how chaotic rules impact on financial innovation in the perspective of chaotic economic theory. A chaotic model of the cumulative effect of financial innovation is set up to study the factors affecting the cumulative effect of financial innovation. These include the impetus for innovation within the financial system itself, the pulling force of economic growth, regulation, and the factors that also slow down financial evolution. All of these influences are dictated by chaotic rules. Our approach should provide both deeper understanding and a wider basis for a regulatory authority to apply control in financial innovation.