What does Financial Instrument Innovation mean?

Question

also explain why is it one of the Key Factors to the Globalization of Financial Market.

Answer 1

Financial instrument innovation is development and use of new financial instruments, including pass-throughs and derivatives. As to why it is a key factor in globalization of financial markets, it's not. The absolute majority of financial markets around the world are not innovative. Financial instrument innovation is a niche phenomenon largely specific to developed markets. About the only exception is the Islamic bond market.

Answer 2

Innovation in any field means doing more with your inputs, ideally for the pursuit of higher profits (larger distance between revenues and costs). Financial Instrument Innovation has brought concepts and their related instruments of debt securitization, hedge funds, among others.

I don't know if I'd say it is key to Globalization to Financial Markets, but perhaps that it has encouraged greater exploration; this is more due to there being more money available to invest than places to put it, as far as traditional Instruments mean.