Document Type
Article
Publication Date
1-2008
Abstract
Recent years have seen an explosion of financial innovation. Much of this innovation seeks to exploit inconsistencies in the regulatory environment, and one of the most popular techniques for doing so uses put-call parity. Nonetheless, regulatory arbitrage using put-call parity is not a new phenomenon, as is frequently suggested. This Essay traces the use of put-call parity to avoid the usury prohibition back to Ancient Israel. It also describes the important role that put-call parity played in developing the equity of redemption, the defining characteristic of a modern mortgage, in Medieval England. In addition, this Essay describes how Muslims living in the West are using mortgage substitutes based on put-call parity to avoid Islam's prohibition on paying interest.
Keywords
finance, financial innovation, financial regulation, put-call parity, regulatory arbitrage, financial history, usury
Publication Title
Oregon Law Review
Repository Citation
Knoll, Michael S., "The Ancient Roots of Modern Financial Innovation: The Early History of Regulatory Arbitrage" (2008). All Faculty Scholarship. 47.
https://scholarship.law.upenn.edu/faculty_scholarship/47
Included in
Economic History Commons, Finance and Financial Management Commons, Law and Economics Commons, Legal History Commons, Property Law and Real Estate Commons
Publication Citation
87 Or. L. Rev. 93 (2008)