Intermediate Financial Theory, Fourth Edition provides an updated and thorough explanation of basic financial concepts, in a manner accessible both to those new to the subject and to those without a deep background in advanced mathematics. It is ideal for students with a background in Economics who are looking for an accessible yet rigorous introduction to financial theory beyond basic MBA-level textbooks. While not as dense as highly technical Ph.D. presentations tend to be, this valuable text seeks rather to integrate academic expertise with real-world experience from leading experts in the field. The fourth edition has been fully updated and is supplemented by extensive online resources.
1. PART I: INTRODUCTION - p. P1 2. Chapter 1. On the Role of Financial Markets and Institutions - p. 3 3. Chapter 2. Finance in the 21st Century: Crisis and Sustainability - p. 33 4. Chapter 3. The Challenges of Asset Pricing: A Road Map - p. 61 5. PART II: THE DEMAND FOR FINANCIAL ASSETS - p. P85 6. Chapter 4. Making Choices in Risky Situations - p. 87 7. Chapter 5. Measuring Risk and Risk Aversion - p. 123 8. Chapter 6. Risk Aversion and Investment Decisions, Part 1 - p. 159 9. Chapter 7. Risk Aversion and Investment Decisions, Part II: Modern Portfolio Theory - p. 189 10. Abstract - p. 189 11. Chapter Outline - p. 189 12. 7.1 Introduction - p. 189 13. 7.2 More About Utility Functions and Return Distributions - p. 190 14. 7.3 Refining the Normality-of-Returns Assumption - p. 196 15. 7.4 Description of the Opportunity Set in the Mean–Variance Space: The Gains from Diversification and the Efficient Frontier - p. 198 16. 7.5 The Optimal Portfolio: A Separation Theorem - p. 204 17. 7.6 Stochastic Dominance and Diversification - p. 205 18. 7.7 Portfolio Choice Under Ambiguity Aversion - p. 211 19. 7.8 Conclusions - p. 215 20. References - p. 215 21. Appendix 7.1 Indifference Curves Under Quadratic Utility or Normally Distributed Returns - p. 215 22. Appendix 7.2 : The Shape of the Efficient Frontier; Two Assets; Alternative Hypotheses - p. 221 23. Appendix 7.3 Constructing the Efficient Frontier - p. 223 24. Chapter 8. Risk Aversion and Investment Decisions, Part III: Challenges to Implementation - p. 231 25. Part III: EQUILIBRIUM PRICING - p. P257 26. Chapter 9. The Capital Asset Pricing Model - p. 259 27. Chapter 10. Arrow–Debreu Pricing, Part I - p. 299 28. Chapter 11. The Consumption Capital Asset Pricing Model: The Foundations - p. 321 29. Abstract - p. 321 30. 11.1 Introduction - p. 321 31. 11.2 The Representative Agent Hypothesis and Its Notion of Equilibrium - p. 322 32. 11.3 An Exchange (Endowment) Economy - p. 326 33. 11.4 Pricing Arrow–Debreu State-Contingent Claims with the CCAPM - p. 334 34. 11.5 Testing the CCAPM: The Equity Premium Puzzle - p. 339 35. 11.6 Testing the CCAPM: Hansen–Jagannathan Bounds - p. 346 36. 11.7 The SDF in Greater Generality - p. 348 37. Conclusion - p. 350 38. References - p. 351 39. Appendix 11.1 Solving the CCAPM with Growth - p. 351 40. Appendix 11.2 Some Properties of the Lognormal Distribution - p. 353 41. Chapter 12. The Consumption CAPM: Extensions - p. 355 42. PART IV: ARBITRAGE PRICING - p. P387 43. Chapter 13. Arrow–Debreu Pricing, Part II - p. 389 44. Chapter 14. The Martingale Measure: Part I - p. 423 45. Chapter 15. The Martingale Measure Part II - p. 449 46. Chapter 16. The Arbitrage Pricing Theory - p. 479 47. PART V: TOPICS - p. P507 48. Chapter 17. Supply, Demand, and the Safe Asset Shortage - p. 509 49. Chapter 18. Portfolio Management in the Long Run - p. 527 50. Chapter 19. The Social Discount Rate and Climate Challenge - p. 565 51. Abstract - p. 565 52. Chapter Outline - p. 565 53. 19.1 Introduction - p. 565 54. 19.2 The Market-Based SDRs and the Model - p. 568 55. 19.3 The Ramsey Model with Risky Prospects - p. 572 56. 19.4 Reflections on the “Market Approach” - p. 574 57. 19.5 Normative Social Discounting - p. 575 58. 19.6 : Discount Rate Uncertainty and the Long Run - p. 577 59. 19.7 The Dynamic Integrated Climate Economy (DICE) Family of Models - p. 580 60. 19.8 - p. 602 61. 19.9 Ambiguity and Climate Uncertainty - p. 605 62. 19.10 Conclusions - p. 607 63. References - p. 607 64. Chapter 20. Sustainable Finance - p. 609 65. Chapter 21. Selected Topics in Corporate Finance - p. 619 66. Chapter 22. Financial Equilibrium with Differential Information - p. 641 67. Index - p. 659
Intermediate Financial Theory, Fourth Edition provides an updated and thorough explanation of basic financial concepts, in a manner accessible both to those new to the subject and to those without a deep background in advanced mathematics. It is ideal for students with a background in Economics who are looking for an accessible yet rigorous introduction to financial theory beyond basic MBA-level textbooks. While not as dense as highly technical Ph.D. presentations tend to be, this valuable text seeks rather to integrate academic expertise with real-world experience from leading experts in the field. The fourth edition has been fully updated and is supplemented by extensive online resources.
1. PART I: INTRODUCTION - p. P1 2. Chapter 1. On the Role of Financial Markets and Institutions - p. 3 3. Chapter 2. Finance in the 21st Century: Crisis and Sustainability - p. 33 4. Chapter 3. The Challenges of Asset Pricing: A Road Map - p. 61 5. PART II: THE DEMAND FOR FINANCIAL ASSETS - p. P85 6. Chapter 4. Making Choices in Risky Situations - p. 87 7. Chapter 5. Measuring Risk and Risk Aversion - p. 123 8. Chapter 6. Risk Aversion and Investment Decisions, Part 1 - p. 159 9. Chapter 7. Risk Aversion and Investment Decisions, Part II: Modern Portfolio Theory - p. 189 10. Abstract - p. 189 11. Chapter Outline - p. 189 12. 7.1 Introduction - p. 189 13. 7.2 More About Utility Functions and Return Distributions - p. 190 14. 7.3 Refining the Normality-of-Returns Assumption - p. 196 15. 7.4 Description of the Opportunity Set in the Mean–Variance Space: The Gains from Diversification and the Efficient Frontier - p. 198 16. 7.5 The Optimal Portfolio: A Separation Theorem - p. 204 17. 7.6 Stochastic Dominance and Diversification - p. 205 18. 7.7 Portfolio Choice Under Ambiguity Aversion - p. 211 19. 7.8 Conclusions - p. 215 20. References - p. 215 21. Appendix 7.1 Indifference Curves Under Quadratic Utility or Normally Distributed Returns - p. 215 22. Appendix 7.2 : The Shape of the Efficient Frontier; Two Assets; Alternative Hypotheses - p. 221 23. Appendix 7.3 Constructing the Efficient Frontier - p. 223 24. Chapter 8. Risk Aversion and Investment Decisions, Part III: Challenges to Implementation - p. 231 25. Part III: EQUILIBRIUM PRICING - p. P257 26. Chapter 9. The Capital Asset Pricing Model - p. 259 27. Chapter 10. Arrow–Debreu Pricing, Part I - p. 299 28. Chapter 11. The Consumption Capital Asset Pricing Model: The Foundations - p. 321 29. Abstract - p. 321 30. 11.1 Introduction - p. 321 31. 11.2 The Representative Agent Hypothesis and Its Notion of Equilibrium - p. 322 32. 11.3 An Exchange (Endowment) Economy - p. 326 33. 11.4 Pricing Arrow–Debreu State-Contingent Claims with the CCAPM - p. 334 34. 11.5 Testing the CCAPM: The Equity Premium Puzzle - p. 339 35. 11.6 Testing the CCAPM: Hansen–Jagannathan Bounds - p. 346 36. 11.7 The SDF in Greater Generality - p. 348 37. Conclusion - p. 350 38. References - p. 351 39. Appendix 11.1 Solving the CCAPM with Growth - p. 351 40. Appendix 11.2 Some Properties of the Lognormal Distribution - p. 353 41. Chapter 12. The Consumption CAPM: Extensions - p. 355 42. PART IV: ARBITRAGE PRICING - p. P387 43. Chapter 13. Arrow–Debreu Pricing, Part II - p. 389 44. Chapter 14. The Martingale Measure: Part I - p. 423 45. Chapter 15. The Martingale Measure Part II - p. 449 46. Chapter 16. The Arbitrage Pricing Theory - p. 479 47. PART V: TOPICS - p. P507 48. Chapter 17. Supply, Demand, and the Safe Asset Shortage - p. 509 49. Chapter 18. Portfolio Management in the Long Run - p. 527 50. Chapter 19. The Social Discount Rate and Climate Challenge - p. 565 51. Abstract - p. 565 52. Chapter Outline - p. 565 53. 19.1 Introduction - p. 565 54. 19.2 The Market-Based SDRs and the Model - p. 568 55. 19.3 The Ramsey Model with Risky Prospects - p. 572 56. 19.4 Reflections on the “Market Approach” - p. 574 57. 19.5 Normative Social Discounting - p. 575 58. 19.6 : Discount Rate Uncertainty and the Long Run - p. 577 59. 19.7 The Dynamic Integrated Climate Economy (DICE) Family of Models - p. 580 60. 19.8 - p. 602 61. 19.9 Ambiguity and Climate Uncertainty - p. 605 62. 19.10 Conclusions - p. 607 63. References - p. 607 64. Chapter 20. Sustainable Finance - p. 609 65. Chapter 21. Selected Topics in Corporate Finance - p. 619 66. Chapter 22. Financial Equilibrium with Differential Information - p. 641 67. Index - p. 659
