Financial economics Did You Mean Financial?

Add a link on the top of this Financial economics page Express submission by secure payment !

<table><tr><td>
				  <form name="APform" action="http://www.allopass.com/cb/check.php4" method="POST">
 <input type="hidden" name="CDOC_ID" value="297865">
 <input type="hidden" name="CSITE_ID" value="111941">
 <input type="hidden" name="LG_SCRIPT" value="uk">
 <table border="0" cellpadding="0" cellspacing="0" width="300">
  <tr>
   <td colspan="3">
         <img src="http://www.allopass.com/imgweb/script/uk/cb_os_top.gif" alt="">
       </td>
  </tr>
  <tr>
   <td width="157" valign="middle" bgcolor="White">
    <font face="Arial,Helvetica" color="Black" size="11" Style="font-size: 12px;">
     <b>Enter your access ticket</b>
    </font>
   </td>
   <td width="80" bgcolor="White">
    <input type="text" size="10" maxlength="10" value="Ticket" name="CODE" onFocus="if (this.form.CODE.value=='Ticket') this.form.CODE.value=''" style="BACKGROUND-COLOR: #E7E7E7; BORDER-BOTTOM: #000080 1px solid; BORDER-LEFT: #000080 1px solid; BORDER-RIGHT: #000080 1px solid; BORDER-TOP: #000080 1px solid; COLOR: #000080; CURSOR: text; FONT-FAMILY: Arial; FONT-SIZE: 10pt; FONT-WEIGHT:bold; LETTER-SPACING: normal; WIDTH:85; TEXT-ALIGN=center;">
   </td>
   <td width="58" align="center" bgcolor="White">
    <input type="button" name="APsub" value="" onClick="this.form.submit(); this.form.APsub.disabled=true;" style="border:0px;margin:0px;padding:0px;width:48px; height:18px; background:url('http://www.allopass.com/img/bt_ok.png');">
   </td>
  </tr>
  <tr><td colspan="3" width="300" height="13</font><br><img src="http://www.allopass.com/img/cb_bot.gif" alt=""></td></tr>
 </table>
<input type="hidden" name="DATAS" value="">
</form>		 
</td><td valign=	op"><table border="0" cellpadding="0" cellspacing="0">
 <tr>
  <td>
   <form name="cben" action="https://secure.allopass.com/cb/subscribe.php4" method="POST" target="DisplaySub">
    <input type="hidden" name="START" value="1">
    <input type="hidden" name="SDOC_ID" value="297865">
    <input type="hidden" name="SSITE_ID" value="111941">
    <input type="hidden" name="LANG" value="L_UK">
       <input type="image" src="http://www.allopass.com/imgweb/script/uk/cb_subscribe_os.gif" alt="Ticket d'accès" onClick="window.open('','DisplaySub','toolbar=0,location=0,directories=0,status=1,menubar=0,scrollbars=1,resizable=1,width=600,height=570');" border = 0>
      </form>
  </td>
 </tr>
</table></td></tr></table>

Financial economics is the branch of economics concerned with the workings of financial markets, such as the stock market, and the financing of companies. It can be distinguished from other branches of economics by its "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade." The questions addressed are typically framed in terms of "time, uncertainty, options and information" 1.

Time: money now is traded for money in the future.
Uncertainty (or risk): The amount of money to be transferred in the future is uncertain.
Options: one party to the transaction can make a decision at a later time that will affect subsequent transfers of money.
Information: knowledge of the future can reduce, or possibly eliminate, the uncertainty associated with future monetary value.

Financial economics thus attempts to answer questions such as:

How are the prices of financial assets: stocks, bonds, currencies, and commodities, determined?
What are the effects of a company choosing different methods of financing its operations, such as issuing shares or borrowing?
What portfolio of assets should an investor hold in order to best meet his/her objectives?

In recent decades, a lot of work has concerned itself with the prices of derivatives, financial instruments that derive their value from other, underlying, assets. Stock options are a classic form of derivative -- Fischer Black, Myron S. Scholes, and Robert C. Merton did ground-breaking work in the early 1970s on the determination of stock option prices on the basis of the underlying stock's price and volatility.

The work soon proved to have widespread applications, and helped inspire the creation of ever more complicated derivatives, (swaps, swaptions, etc.) which in turn has kept theorists busy building newer models.

The underlying point behind all the model construction is that of finding a value that arbitrage will enforce. Arbitrage is always a self-terminating activity -- it brings prices to a level at which it can no longer occur. At a certain useful level of abstraction, arbitrage is said to terminate so quickly that it never happens at all, even if some traders do have private information. See no-trade theorem. But real markets have various sorts of friction that inhibit that ideal operation.

Important concepts

References

Professor William Sharpe:"Macro-Investment Analysis"

List of Marketing Topics	List of Management Topics
List of Economics Topics	List of Accounting Topics
List of Finance Topics	List of Economists

External Links

General areas of finance
Financial markets \| Fund management \| Financial institutions \| Personal finance \| Public finance \| Financial mathematics \| Financial economics

~ Did You mean . . .

Financial economics?

Find an article a definition

What is the meaning of Financial economics?

Important concepts

See also

References

External Links

What does Financial economics mean ? Search with Google !

Article on Financial economics, category, different spelling or sense