Master the World of Finance

Finance: A Summary

• Finance is the study and discipline of money, currency and capital assets.

• It is related to economics but bridges the gap between economic principles and financial systems.

• The financial system is divided into personal, corporate, and public finance.

• Assets are bought, sold, or traded as financial instruments in financial systems.

• A broad range of subfields exists within finance, including asset, money, risk, and investment management.

• The early history of finance parallels the early history of money, which is prehistoric.

• Finance emerged as a distinct academic discipline, separate from economics, in the middle of the 20th century.

• Personal finance involves paying for education, financing durable goods, buying insurance, investing, and saving for retirement.

• Corporate finance deals with the actions that managers take to increase the value of the firm to the shareholders.

• Public finance describes finance related to sovereign states, sub-national entities, and related public entities or agencies.

• Investment management is the professional asset management of various securities, typically shares and bonds, in order to meet specified investment goals for the benefit of investors.

• Quantitative finance includes finance activities where a sophisticated mathematical model is required and overlaps several other areas of finance.Overview of Finance

• Financial mathematics is the application of mathematics to financial markets and models.

• The field of financial mathematics is focused on modeling derivatives, interest rate and credit risk modeling, insurance mathematics, and quantitative portfolio management.

• The field is referred to as quantitative or mathematical finance and comprises primarily of three areas: asset pricing, corporate finance, and financial intermediation.

• The main mathematical tools and techniques are derivatives pricing, risk and portfolio management, and computational finance.

• Experimental finance aims to experimentally observe and analyze agents' behavior and the resulting characteristics of trading flows, information diffusion, and aggregation, price setting mechanisms, and returns processes.

• Behavioral finance studies how the psychology of investors or managers affects financial decisions and markets.

• Behavioral finance includes topics such as biases, heuristics, and framing effects.

• Quantum finance is an interdisciplinary research field, applying theories and methods developed by quantum physicists and economists to solve problems in finance.

• The origin of finance can be traced to the start of civilization, with evidence dating back to around 3000 BC.

• The Babylonians were among the first to charge interest, and Jews were not allowed to take interest from other Jews.

• By 1200 BC, cowrie shells were used as a form of money in China, and by 640 BC, the Lydians had started to use coin money.

• The use of coins as a means of representing money began in the years between 600 and 570 BCE, and cities under the Greek empire started to mint their own coins.

• The London Stock Exchange was founded in 1773 and the New York Stock Exchange was founded in 1793.