John Geanakoplos, James Tobin Professor of Economics, Present Value Prices and the Real Rate of Interest, Irving Fisher's Impatience Theory of Interest, Shakespeare's Merchant of Venice and Collateral, Present Value and the Vocabulary of Finance, How a Long-Lived Institution Figures an Annual Budget; Yield, Overlapping Generations Models of the Economy.

Smith, in International Encyclopedia of the Social & Behavioral Sciences, 2001 Finance... Trade Costs and Home Bias. Your use of the MIT OpenCourseWare site and materials is subject to our Creative Commons License and other terms of use.

Freely browse and use OCW materials at your own pace. ), Learn more at Get Started with MIT OpenCourseWare. The theory of finance, as presented in this text, is prerequisite to security analysis, portfolio theory, money and … CONCEPTS. Fall 2008.

Financial Theory.

V.L. FINANCIAL THEORIES &.

Demography and Asset Pricing: Will the Stock Market Decline when the Baby Boomers Retire? Send to friends and colleagues.

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As above, the financial system constitutes the flow of capital, between individuals (personal finance), governments (public finance), and businesses (corporate finance). This course introduces the core theory of modern financial economics and financial management, with a focus on capital markets and investments. (This image is in the public domain, found on Wikimedia Commons.). Because finance theory has developed into a cohesive body of knowledge, it underlies almost all of what had formerly been thought of as disparate topics. The "economy" is a social institution that organizes a society's production, distribution, and consumption of goods and services, all of which must be financed.

This course attempts to explain the role and the importance of the financial system in the global economy.

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Finance Theory Handbook of Economic Forecasting. This is one of over 2,200 courses on OCW. Sloan School of Management Modify, remix, and reuse (just remember to cite OCW as the source. Topics include functions of capital markets and financial intermediaries, asset valuation, fixed-income securities, common stocks, capital budgeting, diversification and portfolio selection, equilibrium pricing of risky assets, the theory of efficient markets, and an introduction to derivatives and options.

See related courses in the following collections: Andrew Lo. Find materials for this course in the pages linked along the left. The basic concepts of the theory are the efficient frontier, Capital Asset Pricing Model and beta … Greater Fool Theory. 1. Courses Each area of finance may have dozens of associated concepts of finance theory; understanding all of them could take a lifetime of … Finance theory is a broad field of both speculation and mathematical measurements used to determine investing strategies and monetary value estimates. For more information about using these materials and the Creative Commons license, see our Terms of Use.

» Uncertainty and the Rational Expectations Hypothesis: Applications to Predicting Stock Prices, Default Probabilities, and Hyperbolic Discounting, Backward Induction and Optimal Stopping Times, Callable Bonds and the Mortgage Prepayment Option, Modeling Mortgage Prepayments and Valuing Mortgages, History of the Mortgage Market: A Personal Narrative, Risk Aversion and the Capital Asset Pricing Theorem, The Mutual Fund Theorem and Covariance Pricing Theorems, The Leverage Cycle and the Subprime Mortgage Crisis. Modern Portfolio Theory (MPT) The Modern portfolio theory {MPT}, "proposes how rational investors will use diversification to optimize their portfolios, and how an asset should be priced given its risk relative to the market as a whole. Massachusetts Institute of Technology. Use OCW to guide your own life-long learning, or to teach others. A belief, policy, or procedure proposed as the basis of action.



Download files for later. With more than 2,400 courses available, OCW is delivering on the promise of open sharing of knowledge. Financial Market and Institution Public Finance Asset Pricing Investment Banking Valuation Behavioral Finance Corporate Governance . 15.401 Finance Theory I. Knowledge is your reward. Unless explicitly set forth in the applicable Credits section of a lecture, third-party content is not covered under the Creative Commons license. » Finance Theory I, Trading in process on the floor of the New York Stock Exchange. Although they are closely related, the disciplines of economics and finance are distinct. » Please consult the Open Yale Courses Terms of Use for limitations and further explanations on the application of the Creative Commons license.

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Topics include functions of capital markets and financial intermediaries, asset valuation, fixed-income securities, common stocks, capital budgeting, diversification and portfolio selection, equilibrium pricing of risky assets, the theory of efficient markets, and an introduction to derivatives and options. Rather than separating off the financial world from the rest of the economy, financial equilibrium is studied as an extension of economic equilibrium. There's no signup, and no start or end dates.

Learn more », © 2001–2018 When Finance as a Discipline been Developed and Recognized? A set of principles on which the practice of an activity is based.

Home The greater fool theory proposes that you can profit from investing as long as … License: Creative Commons BY-NC-SA.

Theories of finance are also used to create fundraising and capital creation plans and manage financial risk. FINANCIAL THEORIES &CONCEPTS.

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