The financial market melt-down of the years 2007-2009 has posed great
challenges for studies on financial economics. This financial economics
text focuses on the dynamic interaction of financial markets and
economic activity. The financial market to be studied here encompasses
the money and bond market, credit market, stock market and foreign
exchange market; economic activity includes the actions and interactions
of firms, banks, households, governments and countries. The book shows
how economic activity affects asset prices and the financial market, and
how asset prices and financial market volatility and crises impact
economic activity. The book offers extensive coverage of new and
advanced topics in financial economics such as the term structure of
interest rates, credit derivatives and credit risk, domestic and
international portfolio theory, multi-agent and evolutionary approaches,
capital asset pricing beyond consumption-based models, and dynamic
portfolio decisions. Moreover a completely new section of the book is
dedicated to the recent financial market meltdown of the years
2007-2009. Emphasis is placed on empirical evidence relating to episodes
of financial instability and financial crises in the U.S. and in Latin
American, Asian and Euro-area countries. Overall, the book explains what
researchers and practitioners in the financial sector need to know about
the financial-real interaction, and what practitioners and policy makers
need to know about the financial market.
