Financial economics

Financial economics studies how people and institutions allocate resources over time and under uncertainty through financial markets, asset prices, and investment decisions.

Time value of money: The principle that money available now is worth more than the same amount available later because it can earn a return. Discounting future cash flows makes investments at different dates comparable.
Capital asset pricing model: An equilibrium model relating an asset's expected return to its exposure to market risk. It gives a compact benchmark for expected returns in diversified markets.
Corporate finance: The study of how firms choose investments, financing, and distributions to investors. It applies financial reasoning to firms’ capital allocation and funding choices.
Behavioral finance: The study of how psychological biases and social influences affect financial decisions and markets. It challenges assumptions of fully rational investors used in standard models.
Financial crisis of 2007–2008: A global crisis triggered by turmoil in mortgage finance and followed by severe financial and economic disruption. The crisis exposed weaknesses in risk models and financial-system assumptions.
Expected utility hypothesis: A model in which choices under uncertainty maximize expected utility across possible outcomes. It formalizes how risk preferences shape financial decisions.
Arbitrage pricing theory: An asset-pricing theory that relates expected returns to exposure to multiple systematic risk factors. It generalizes risk-based pricing beyond a single market factor.
Bond valuation: The process of estimating a bond's value from its promised cash flows and relevant yields. Discounting contractual payments is a central financial-economics application.
Post-Keynesian economics: A school of economics emphasizing fundamental uncertainty, monetary production, and demand-driven outcomes. Its treatment of uncertainty and finance differs from equilibrium-centered approaches.
Financial regulation: Rules and supervisory practices governing financial institutions, markets, and products. Economic theories of incentives and risk inform debates over market oversight.

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