Principles of Financial Economics PDF Download Ebook. Stephen F. LeRoy, Jan Werner and Stephen A. Ross introduce graduate students in economics to the subfield of financial economics. It stresses the link between financial economics and equilibrium theory, devoting less attention to purely financial topics such as calculation of derivatives.
Since students often find this link hard to grasp, the treatment sims to make the connection explicit and clear in each stage of the exposition. Emphasis is placed on detailed study of two-date models, because almost all of the key ideas in financial economics can be developed in the two-date setting. The analysis aims to be comparable in rigor to the best work in microeconomics; at the same time, the authors provide enough discussion and examples to make the ideas readily understandable
This text also gives an introduction to financial economics in discrete time, which is the appropriate framework to study the basic economic principles. Central topics are the absence of arbitrage and its implications for asset pricing, risk, portfolio choice and the (non-) optimality of equilibrium allocations. Author will also discuss the CAPM as a special class of models of security markets. The analysis starts with a two period model and is then extended to multiple periods, where we end with the martingale property of asset prices.
This is an excellent introduction to the exciting field of financial economics, rigorous yet filled with economic intuition, and with a refreshing emphasis on equilibrium that is reminiscent of Debreu's elegant and pithy monograph.
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