In addition, unbundling has helped erode legal barriers to competition, by enabling one or more attributes of a product to be modified in order to exploit statutory or regulatory “loopholes.” A classic example, of course, is the introduction of money market mutual funds, which ultimately forced the removal of Regulation Q interest rate ceilings on deposit accounts.
It is important to recognize that these developments would not have been possible without complementary advances in technology across several disciplines. First, innovations in finance theory, such as the principle of financial arbitrage and models for pricing contingent claims, provided a conceptual framework for understanding and modeling financial risks.