Financial Markets Theory

The first book to combine the latest discussion on financial market theory with precision mathematics and how practical results influence research, Financial Markets Theory, addresses the need for a book like this to accompany the most popular related titles. Using simple maths and an introductory background to the economics required, anyone studying or working in financial markets should have a copy of this book. It covers all the key topics with exercises and examples that make it ideal for self-study or as an advanced graduate textbook, but it includes so much recent research that it is also a vital handbook for practitioners working in banks, insurance, investment funds and financial consultancy.

Provides up-to-date economic perspective The only book to assess the how the empirical testing of financial markets has motivated research Ideal as a graduate textbook, with examples and exercises Also suitable as a handbook for practitioners Self-contained tools for understanding the economic analysis are provided and mathematical models presented in discrete time/finite state space for simplicity

Inhalt
1 Prerequisites.- 1.1 Choices under Certainty.- 1.2 General Equilibrium Theory.- 1.3 Pareto Optimality.- 2 Choices under Risk.- 2.1 Expected Utility Theory.- 2.2 Risk Aversion.- 2.3 Portfolio Problem.- 2.4 Insurance Demand and Prudence.- 2.5 Notes, References and Exercises.- 3 Stochastic Dominance, Mutual Funds Separation and Portfolio Frontier.- 3.1 Stochastic Dominance.- 3.2 Mean-Variance Analysis.- 3.3 Portfolio Frontier (risky assets).- 3.4 Portfolio Frontier (risky assets and a risk free asset).- 3.5 Mutual Funds Separation.- 3.6 Notes, References and Exercises.- 4 General Equilibrium Theory and Risk Exchange.- 4.1 Risk Sharing and Pareto Optimality.- 4.2 Asset Markets.- 4.3 Intertemporal Consumption.- 4.4 The Fundamental Asset Pricing Theorem I.- 4.5 Notes, References and Exercises.- 5 Risk Premium: Capital Asset Pricing Model and Asset Pricing Theory.- 5.1 Capital Asset Pricing Model (CAPM).- 5.2 Empirical Tests of the CAPM.- 5.3 Arbitrage Pricing Theory (APT).- 5.4 Empirical Tests of the APT.- 5.5 Notes, References and Exercises.- 6 Multiperiod Market Models.- 6.1 Portfolio Choice, Consumption and Equilibrium.- 6.2 The Fundamental Asset Pricing Theorem II.- 6.3 Risk Premium and Factor Models.- 6.4 The No Arbitrage Fundamental Equation and Bubbles.- 6.5 Empirical Tests: Price-Dividend Process.- 6.6 Empirical Tests: CCAPM, ICAPM and Risk Premium.- 6.7 Notes, References and Exercises.- 7 Information and Financial Markets.- 7.1 The Role of Information in Financial Markets.- 7.2 On the Possibility of Efficient Markets.- 7.3 On the Impossibility of Efficient Markets.- 7.4 Multiperiod Models.- 7.5 Empirical Analysis.- 7.6 Notes, References and Exercises.- 8 Uncertainty, Rationality and Heterogeneity.- 8.1 Uncertainty, Risk and Probability.- 8.2 On Expected Utility Theory.- 8.3 Heterogeneous Agents and Substantial Rationality.- 8.4 Bounded Rationality, Incomplete Information and Learning.- 8.5 Imperfect and Incomplete Markets.- 9 Financial Markets Microstructure.- 9.1 The Role of Information under non-Perfect Competition.- 9.2 Order Driven Markets.- 9.3 Quote Driven Markets.- 9.4 Multiperiod Market Models.- 10 Corporate Finance.- 10.1 Modigliani-Miller Theorem.- 10.2 Asymmetric Information.- 10.3 Agency Models.- 11 Intermediation and Regulation.- 11.1 Institutional Investors, Intermediation and Financial Markets.- 11.2 Market Design.- 11.3 Market Abuse: Insider Trading and Market Manipulation.- References.