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Financial economics is the branch of economics concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment" [1]. Economics is the social science that studies the production distribution, and consumption of goods and services. It is additionally characterised by its "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade" [2]. The questions within Financial economics are typically framed in terms of "time, uncertainty, options and information" [3].

Contents

Subject matter

Given its scope, as above, financial economics tends to deal with the workings of financial markets, such as the stock market, and the financing of companies, and includes the following subject areas: Budgeting, saving, investing, borrowing, lending, insuring, hedging, diversifying, and asset management. In Economics, a financial market is a mechanism that allows people to easily buy and sell ( Trade) financial Securities (such as stocks and bonds A stock market, or (equity market is a private or public market for the trading of company Stock and derivatives of company The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated A corporation is a separate legal entity usually used to conduct business Because the future is never known with certainty, a central concern of financial economics is the impact of uncertainty on resource allocation.

Financial economics thus attempts to answer questions such as:

Assumptions

Financial economics is based on many assumptions - chief amongst these, that financial decision makers are rational (see Homo economicus; Efficient market hypothesis). In Business and Accounting, assets are everything owned by a person or company (all tangible and intangible property that can be converted into cash. Software for Fixed assets management and Stock control developed in 2004. In Finance, a bond is a Debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and Interest Debt is that which is owed usually referencing Assets owed but the term can cover other obligations Investment or investing is a term with several closely-related meanings in Business management, Finance and Economics, related to saving Homo economicus, or Economic man, is the concept in some Economic theories of man (that is a Human) as a rational, perfectly informed and However, recently, researchers in Experimental economics and Experimental finance have challenged this assumption empirically. Experimental economics is a the application of experimental methods to study economic questions The goals of experimental finance are to establish different market settings and environments to observe experimentally and analyze agents' behavior and the resulting characteristics A central concept in Science and the Scientific method is that all Evidence must be empirical, or empirically based that is dependent on evidence Further, these assumptions are challenged - theoretically - by Behavioral finance, a discipline primarily concerned with the rationality, or lack thereof, of economic agents. The word theory has many distinct meanings in different fields of Knowledge, depending on their methodologies and the context of discussion. Behavioral economics and behavioral finance are closely related fields which apply scientific research on human and social cognitive and emotional factors to better

Other common assumptions include market prices following a random walk, or asset returns being normally distributed. A random walk, sometimes denoted RW, is a Mathematical formalization of a trajectory that consists of taking successive Random steps The normal distribution, also called the Gaussian distribution, is an important family of Continuous probability distributions applicable in many fields Empirical evidence suggests that these assumptions may not hold, and in practice, traders and analysts, and particularly risk managers, frequently modify the "standard models". Financial risk management is the practice of creating economic value in a firm by using Financial instruments to manage exposure to Risk, particularly

Important concepts

Finance journals

See also

External links and references

Theory

Context and history

Links and portals

Education

Master's degrees in financial economics are often a joint offering by the business school and the economics department. Murray State University, located in the town of Murray, Kentucky, is an approximately 10000-student four-year public university Peter L Bernstein (b January 22, 1919) is an American Author, Economist, and Educator. A business school is a university-level institution that confers degrees in Business Administration

Cardiff University (Prifysgol Caerdydd is a leading University located in the Cathays Park area of Cardiff, Wales, United Kingdom City University London ( CUL) is a British University based in Northampton Square, Islington, London. The University of Essex is a British Campus university located near the town of Colchester, England The University of Exeter (usually abbreviated as Exon for post-nominals) is a University in the South West of The University of Glasgow (Oilthigh Ghlaschu was founded in 1451 in Glasgow, Scotland and along with its contemporary institutions the University of St Andrews The University of Johannesburg ( Johannesburg, South Africa) came into existence on 1 January 2005 as the result of a merger between Kingston University is a University in the Royal Borough of Kingston upon Thames, south-west London. The University of Leicester is a research led university based in Leicester, England, with approximately 19000 registered students - about 12000 of them full-time The Catholic University of Leuven, or Louvain, was the largest oldest and most prominent university in Belgium. Queen Mary University of London (known as Queen Mary and Westfield College until 2000 and still officially named as such in its charter Queen Mary incorporates several The University of London is a university based primarily in London, England, UK. The School of Oriental and African Studies (commonly abbreviated to " SOAS " pronounced (so as or (so az is a constituent college of the University of The University of London is a university based primarily in London, England, UK. Loughborough University is a Campus university located in the Market town of Loughborough, Leicestershire, in the East Midlands The BI Norwegian School of Management (Handelshøyskolen BI is the largest business school in Norway and the second largest in all of Europe The University of Nottingham is a Public, Co-educational institution of Higher learning in the city of Nottingham, England. The William S Spears School of Business (or SSB) serves as the Business component of OSU-Stillwater in Stillwater Oklahoma. Saïd Business School ( SBS) is the Business school of the University of Oxford in England. The University of Oxford (informally "Oxford University" or simply "Oxford" located in the city of Oxford, Oxfordshire, England is the The Rotman School of Management is the University of Toronto 's business school This article is about the University of Toronto's St George Campus The University of Sheffield is a research University, located in Sheffield in South Yorkshire, England.
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