Financial Economics (Hardcover)

This book examines economic activity in financial markets: how capital assets are priced and how these prices change over time. The analysis starts in a certainty setting by exploring way individuals use financial securities to choose their current and future consumption flows, before moving on to an uncertainty setting where security prices are obtained using standard intermediate microeconomic analysis that relies heavily on the use of diagrams to bring together the demand and supply decisions of traders in financial markets.

The book provides an excellent introduction to the basic classical finance model where financial assets are a veil over the real economy.

Most undergraduate finance textbooks emphasize explaining the institutional aspects of financial markets and rely heavily on partial equilibrium analysis, while most graduate finance textbooks use formal general equilibrium analysis. The analysis in this book sits between these two approaches and thus provides the student with a nuts and bolts guide to the whole area of financial economics.