Subject Matter
Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance.
It studies the following:
- Valuation - Determination of the fair value of an asset
- How risky is the asset? (identification of the asset appropriate discount rate)
- What cash flows will it produce? (discounting of relevant cash flows)
- How does the market price compare to similar assets? (relative valuation)
- Are the cash flows dependent on some other asset or event? (derivatives, contingent claim valuation)
- Financial markets and instruments
- Commodities - topics
- Stocks - topics
- Bonds - topics
- Money market instruments- topics
- Derivatives - topics
- Financial institutions and regulation
Financial Econometrics is the branch of Financial Economics that uses econometric techniques to parameterise the relationships.
Read more about this topic: Financial Economics
Famous quotes containing the words subject and/or matter:
“I have always hated biography, and more especially, autobiography. If biography, the writer invariably finds it necessary to plaster the subject with praises, flattery and adulation and to invest him with all the Christian graces. If autobiography, the same plan is followed, but the writer apologizes for it.”
—Carolyn Wells (1862–1942)
“In most cases a favorite writer is more with us in his book than he ever could have been in the flesh; since, being a writer, he is one who has studied and perfected this particular mode of personal incarnation, very likely to the detriment of any other. I should like as a matter of curiosity to see and hear for a moment the men whose works I admire; but I should hardly expect to find further intercourse particularly profitable.”
—Charles Horton Cooley (1864–1929)