Principles of Financial Economics

This book introduces 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 valuation of derivatives. Since students often find this link hard to grasp, the treatment aims 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 is intended 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.

Stephen F. LeRoy is Professor of Economics Emeritus at the University of California, Santa Barbara. Early in his career, he was an economist in the research departments of the Federal Reserve Bank of Kansas City and the Board of Governors of the Federal Reserve System. He then moved to the economics department at the University of California, Santa Barbara. He also served as Carlson Professor of Finance in the Carlson School of Management, University of Minnesota. He has had visiting appointments at the University of California, Berkeley, the University of California, Davis, the California Institute of Technology, and the University of Chicago. He earned his PhD in economics from the University of Pennsylvania.