The Economics of Financial Markets
Cambridge University Press, 5/26/2005
EAN 9780521612807, ISBN10: 0521612802
Paperback, 548 pages, 24.6 x 18.9 x 3.6 cm
Language: English
The Economics of Financial Markets presents a concise overview of capital markets, suitable for advanced undergraduates and for beginning graduate students in financial economics. Following a brief overview of financial markets - their microstructure and the randomness of stock market prices - this textbook explores how the economics of uncertainty can be applied to financial decision-making. The mean-variance model of portfolio selection is discussed, with analysis extended to the capital asset pricing model (CAPM). Arbitrage plays a pivotal role in finance and is studied in a variety of contexts, including the APT model of asset prices. Methods for the empirical evaluation of CAPM and APT are also discussed, together with the volatility of asset prices, the intertemporal CAPM and the equity premium puzzle. An analysis of bond contracts leads into an assessment of theories of the term structure of interest rates. Finally, financial derivatives are explored, focusing on futures and options contracts.
Preface
1. Asset markets and asset prices
2. Asset market microstructure
3. Predictability of prices and market efficiency
4. Decision making under uncertainty
5. Portfolio selection
the mean-variance model
6. The capital asset pricing model, CAPM
7. Arbitrage
8. Factor models and arbitrage pricing theory, APT
9. Empirical appraisal of the CAPM
10. Present value relationships and price variability
11. Intertemporal choice and equity premium puzzle
12. Bond markets and fixed-interest securities
13. Term structure and interest rates
14. Futures markets - fundamentals
15. Futures markets - speculation and hedging
16. Futures markets - applications
17. Swap contracts and swap markets
18. Options markets
fundamentals
19. Options markets - price determination
20. Options markets - applications.
'This is a very well-written and thorough presentation of the key topics in financial economics - the book deserves to be widely adopted in support of courses in this dynamic area of teaching and research.' Peter Smith, Professor of Economics and Finance, University of York