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". 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". The questions within financial economics are typically framed in terms of "time, uncertainty, options, and information".
- 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 (FMV).
The subject is usually taught at a postgraduate level; see Master of Financial Economics.
Famous quotes containing the words financial and/or economics:
“A theory of the middle class: that it is not to be determined by its financial situation but rather by its relation to government. That is, one could shade down from an actual ruling or governing class to a class hopelessly out of relation to government, thinking of govt as beyond its control, of itself as wholly controlled by govt. Somewhere in between and in gradations is the group that has the sense that govt exists for it, and shapes its consciousness accordingly.”
—Lionel Trilling (19051975)
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—Paula Nelson (b. 1945)