Financial Economics Assignment Help

Financial Economics is the branch of economics concerned with “the allocation and deployment of resources, both having space and time, in an uncertain environment.” Financial Economics focuses on the investments that the firms or the individuals make in the wide variety of the financial investment options like real estate, stocks, bonds etc available in this modern economy. The Financial investment refers to either buying or building an asset in the expectation that it will generate some financial gain over a period of time. The financial economics analyzes the use and distribution of resources in markets in making decisions are made under uncertainty.

The fundamental concept of the financial economic is that The rate of return of the investment’s made is inversely proportional to the price of investments made. The financial variables like prices of the commodities, interest rates and shares help in the assessments of the financial economics which concerns with the real economy. One of the basic principles in the financial economics is the Present value – the value of the present day , or worth of which the costs are expected to arrive in the future. Financial Econometrics is the branch of the Financial Economics which uses econometric techniques to parameterise the relationships. It is primarily concerned with building models to derive testable implications from acceptable assumptions. It also involves the creation of some sophisticated models to test the variables affecting a particular decision.

Some fundamental ideas in financial economics are the Portfolio Theory and the Capital Asset Pricing Model .The Portfolio theory studies how the investors should maintain their portfolio, i.e. how they should balance risk and return when they make the investments in securities or assets. The Capital Asset Pricing model describes how markets should set the prices of the assets in relation to how risky they are.

Therefore, Financial Economics studies the investor’s preferences (high rates of return and a dislike of risk and uncertainty) and how they affect the trading and pricing of financial assets like stocks, real estates and bonds.