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Principles of Financial Economics

Author

Listed:
  • LeRoy,Stephen F.
  • Werner,Jan

Abstract

This second edition provides a rigorous yet accessible graduate-level introduction to financial economics. Since students often find the link between financial economics and equilibrium theory hard to grasp, less attention is given to purely financial topics, such as valuation of derivatives, and more emphasis is placed on making the connection with equilibrium theory explicit and clear. This book also provides a detailed study of two-date models because almost all of the key ideas in financial economics can be developed in the two-date setting. Substantial discussions and examples are included to make the ideas readily understandable. Several chapters in this new edition have been reordered and revised to deal with portfolio restrictions sequentially and more clearly, and an extended discussion on portfolio choice and optimal allocation of risk is available. The most important additions are new chapters on infinite-time security markets, exploring, among other topics, the possibility of price bubbles.

Suggested Citation

  • LeRoy,Stephen F. & Werner,Jan, 2014. "Principles of Financial Economics," Cambridge Books, Cambridge University Press, number 9781107673021.
    • Handle: RePEc:cup:cbooks:9781107673021
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    Cited by:

    1. Alan Beggs, 2021. "Afriat and arbitrage," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(2), pages 167-176, October.
    2. Arai, Takuji & Asano, Takao & Nishide, Katsumasa, 2019. "Optimal initial capital induced by the optimized certainty equivalent," Insurance: Mathematics and Economics, Elsevier, vol. 85(C), pages 115-125.
    3. Werner, Jan, 2022. "Speculative trade under ambiguity," Journal of Economic Theory, Elsevier, vol. 199(C).
    4. Derek Singh & Shuzhong Zhang, 2020. "Robust Arbitrage Conditions for Financial Markets," Papers 2004.09432, arXiv.org.
    5. Viviana Ventre & Roberta Martino, 2022. "Quantification of Aversion to Uncertainty in Intertemporal Choice through Subjective Perception of Time," Mathematics, MDPI, vol. 10(22), pages 1-16, November.
    6. Takashi Kamihigashi, 2015. "A Simple No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2015-38, Research Institute for Economics & Business Administration, Kobe University.
    7. Koch-Medina, Pablo & Wenzelburger, Jan, 2018. "Equilibria in the CAPM with non-tradeable endowments," Journal of Mathematical Economics, Elsevier, vol. 75(C), pages 93-107.
    8. Johannes Gierlinger & Pau Milán, 2021. "The Limits to Local Insurance," Working Papers 1293, Barcelona School of Economics.
    9. Chambers, Robert G. & Melkonyan, Tigran, 2017. "Ambiguity, reasoned determination, and climate-change policy," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 74-92.
    10. Michael Zierhut, 2016. "Partially revealing rational expectations equilibrium with real assets and binding constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 495-516, August.
    11. Takashi Kamihigashi, 2016. "A Simple Optimality-Based No-Bubble Theorem for Deterministic Sequential Economies," Discussion Paper Series DP2016-22, Research Institute for Economics & Business Administration, Kobe University.
    12. Ziping Zhao & Daniel P. Palomar, 2017. "Mean-Reverting Portfolio Design with Budget Constraint," Papers 1701.05016, arXiv.org.
    13. Marc Oliver Bettzüge & Thorsten Hens & Michael Zierhut, 2022. "Financial intermediation and the welfare theorems in incomplete markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 457-486, April.
    14. Jan Werner, 2021. "Participation in risk sharing under ambiguity," Theory and Decision, Springer, vol. 90(3), pages 507-519, May.
    15. Kamihigashi, Takashi, 2018. "A Simple optimality-based no-bubble theorem for deterministic sequential economies with strictly monotone preferences," Mathematical Social Sciences, Elsevier, vol. 91(C), pages 36-41.
    16. Salvador Cruz Rambaud, 2019. "Algebraic Properties of Arbitrage: An Application to Additivity of Discount Functions," Mathematics, MDPI, vol. 7(9), pages 1-25, September.
    17. Emy Lécuyer & Victor Filipe Martins da Rocha, 2022. "Convex Asset Pricing," Working Papers hal-03916844, HAL.
    18. Bloise, Gaetano & Polemarchakis, Herakles & Vailakis, Yiannis, 2018. "Sustainable Debt," The Warwick Economics Research Paper Series (TWERPS) 1178, University of Warwick, Department of Economics.
    19. Derek Singh & Shuzhong Zhang, 2021. "Robust Arbitrage Conditions for Financial Markets," SN Operations Research Forum, Springer, vol. 2(3), pages 1-52, September.
    20. Yehuda Izhakian & David Yermack & Jaime F. Zender, 2022. "Ambiguity and the Tradeoff Theory of Capital Structure," Management Science, INFORMS, vol. 68(6), pages 4090-4111, June.
    21. Matteo Burzoni & Frank Riedel & H. Mete Soner, 2021. "Viability and Arbitrage Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 89(3), pages 1207-1234, May.
    22. Jan Werner, 2018. "Speculative Bubbles, Heterogeneopus Beliefs, and Learning," 2018 Meeting Papers 1216, Society for Economic Dynamics.
    23. Rodrigues, Ana Flávia P. & Cavalcante, Charles C. & Crisóstomo, Vicente L., 2019. "A projection pricing model for non-Gaussian financial returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).
    24. Werner, Jan, 2014. "Rational asset pricing bubbles and debt constraints," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 145-152.

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