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 attempts to answer questions such as:
- How are the prices of financial assets, such as shares and bonds, 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 her objectives?
Key concepts used in financial economics include:
See also: Financial mathematics, Mathematical economics