Financial economics is the branch of economics concerned with the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment. It is additionally characterised by its concentration on monetary activities, in which money of one type or another is likely to appear on both sides of a trade. The questions within financial economics are typically framed in terms of "time, uncertainty, options and information.
Time: money now is traded for money in the future.
Uncertainty or risk. The amount of money to be transferred in the future is uncertain.
one party to the transaction can make a decision at a later time that will affect subsequent transfers of money.
knowledge of the future can reduce, or possibly eliminate, the uncertainty associated with future monetary value.
Subject matter
Given its scope, as above, financial economics tends to deal with the workings of financial markets, such as the stock market, and the financing of companies, and includes the following subject areas: Budgeting, saving, investing, borrowing, lending, insuring, hedging, diversifying, and asset management. Because the future is never known with certainty, a central concern of financial economics is the impact of uncertainty on resource allocation
