ABSTRACT
Financial innovation, which is the process of creating new financial securities, following customers’ needs and exploiting temporary faults in regulation, represents the natural evolution of markets, where players are looking for new profitable opportunities and better resource allocation. Innovation exploits the imperfections and inefficiencies of markets, avoids regulation, and gives rise to extra profits, specifically because at the beginning there is no patent protection. Innovation is the way animal spirits emerge on the market, and profits are the premium earned by the innovator.
