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Financial economics is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade". Its concern is thus the interrelation of financial variables, such as share prices, interest rates and exchange rates, as opposed to those concerning the real economy. It has two main areas of focus: asset pricing and corporate finance; the first being the perspective of providers of capital, i.e. investors, and the second of users of capital. It thus provides the theoretical underpinning for much of finance.
Robert Cox Merton is an American economist, Nobel Memorial Prize in Economic Sciences laureate, and professor at the MIT Sloan School of Management, known for his pioneering contributions to continuous-time finance, especially the first continuous-time option pricing model, the Black–Scholes–Merton model. In 1997 Merton together with Myron Scholes were awarded the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel for the method to determine the value of derivatives.
The MIT Sloan School of Management is the business school of the Massachusetts Institute of Technology, a private university in Cambridge, Massachusetts. MIT Sloan offers bachelor's, master's, and doctoral degree programs, as well as executive education. Its degree programs are among the most selective in the world. MIT Sloan emphasizes innovation in practice and research. Many influential ideas in management and finance originated at the school, including the Black–Scholes model, the Solow–Swan model, the random walk hypothesis, the binomial options pricing model, and the field of system dynamics. The faculty has included numerous Nobel laureates in economics and John Bates Clark Medal winners.
The Modigliani–Miller theorem is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the enterprise value of a firm is unaffected by how that firm is financed. This is not to be confused with the value of the equity of the firm. Since the value of the firm depends neither on its dividend policy nor its decision to raise capital by issuing shares or selling debt, the Modigliani–Miller theorem is often called the capital structure irrelevance principle.
Adjusted present value (APV) is a valuation method introduced in 1974 by Stewart Myers. The idea is to value the project as if it were all equity financed ("unleveraged"), and to then add the present value of the tax shield of debt – and other side effects.
In corporate finance, free cash flow (FCF) or free cash flow to firm (FCFF) is the amount by which a business's operating cash flow exceeds its working capital needs and expenditures on fixed assets. It is that portion of cash flow that can be extracted from a company and distributed to creditors and securities holders without causing issues in its operations. As such, it is an indicator of a company's financial flexibility and is of interest to holders of the company's equity, debt, preferred stock and convertible securities, as well as potential lenders and investors.
In corporate finance, capital structure refers to the mix of various forms of external funds, known as capital, used to finance a business. It consists of shareholders' equity, debt, and preferred stock, and is detailed in the company's balance sheet. The larger the debt component is in relation to the other sources of capital, the greater financial leverage the firm is said to have. Too much debt can increase the risk of the company and reduce its financial flexibility, which at some point creates concern among investors and results in a greater cost of capital. Company management is responsible for establishing a capital structure for the corporation that makes optimal use of financial leverage and holds the cost of capital as low as possible.
Stephen Alan "Steve" Ross was the inaugural Franco Modigliani Professor of Financial Economics at the MIT Sloan School of Management after a long career as the Sterling Professor of Economics and Finance at the Yale School of Management. He is known for initiating several important theories and models in financial economics. He was a widely published author in finance and economics, and was a coauthor of a best-selling Corporate Finance textbook.
Financial modeling is the task of building an abstract representation of a real world financial situation. This is a mathematical model designed to represent the performance of a financial asset or portfolio of a business, project, or any other investment.
Frank J. Fabozzi is an American economist, educator, writer, and investor, currently Professor of Practice at The Johns Hopkins University Carey Business School and a Member of Edhec Risk Institute. He was previously a Professor of Finance at EDHEC Business School, Professor in the Practice of Finance and Becton Fellow in the Yale School of Management, and a Visiting Professor of Finance at the Sloan School of Management at the Massachusetts Institute of Technology. He has authored and edited many books, three of which were coauthored with Nobel laureates, Franco Modigliani and Harry Markowitz. He has been the editor of the Journal of Portfolio Management since 1986 and is on the board of directors of the BlackRock complex of closed-end funds.
Valuation using discounted cash flows is a method of estimating the current value of a company based on projected future cash flows adjusted for the time value of money. The cash flows are made up of those within the “explicit” forecast period, together with a continuing or terminal value that represents the cash flow stream after the forecast period. In several contexts, DCF valuation is referred to as the "income approach".
In corporate finance, the pecking order theory postulates that the cost of financing increases with asymmetric information.
Krishna Palepu is an American academic, author, consultant and director of various corporations. He is the Ross Graham Walker Professor of Business Administration at Harvard Business School. He serves as Senior Adviser to the President of Harvard University for Global Strategy.
Richard A. Brealey is a British economist and author. He is an emeritus professor at the London Business School and a Fellow of the British Academy. He co-authored Principles of Corporate Finance with Stewart C. Myers and Franklin Allen.
Alan J. Marcus is an American economist, and the first recipient of the Mario J. Gabelli Endowed Professorship at the Carroll School of Management at Boston College, where he currently teaches. He is an author of several textbooks widely used in finance and MBA programs internationally, including Fundamentals of Corporate Finance with Stewart Myers and Richard A. Brealey. Marcus serves on the advisory board of the CFA Institute.
Marti G. Subrahmanyam is the Charles E. Merrill Professor of Finance at the Stern School of Business at New York University. He also teaches for the Master of Science in Global Finance (MSGF), which is a joint program between Stern and the Hong Kong University of Science and Technology. Professor Subrahmanyam is best known for his research in the areas of corporate finance, capital markets and international finance.
George S. Oldfield is a financial economist. He has been published extensively, and is cited for his work on the effects of a firm's unvested pension benefits on its share price published in the Journal of Money, Credit and Banking in 1977.
Corporate finance is the area of finance that deals with the sources of funding, and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value.
Principles of Corporate Finance is a reference work on the corporate finance theory edited by Richard Brealey, Stewart Myers, Franklin Allen, and Alex Edmans. The book is one of the leading texts that describes the theory and practice of corporate finance. It was initially published in October 1980 and now is available in its 14th edition. Principles of Corporate Finance has earned loyalty both as a classroom tool and as a professional reference book.
Alex Edmans is professor of finance at London Business School and the current Mercers' School Memorial Professor of Business at Gresham College. Since 2017 he has been the Managing Editor of the Review of Finance, the leading academic finance journal in Europe. He gave the TED talk What to Trust in a Post-Truth World, on confirmation bias and the importance of being discerning with evidence. In 2021 he was named Professor of the Year by Poets & Quants.
References
- ↑ "MIT Sloan". Archived from the original on December 7, 2007.
- ↑ Wiley Interscience
- ↑ "Archived copy" (PDF). Archived from the original (PDF) on 2016-03-04. Retrieved 2010-05-12.
{{cite web}}: CS1 maint: archived copy as title (link) - ↑ "Stocks". 15 June 2023.[ dead link ]
- ↑ "Why Stew Myers matters - MIT Sloan School of Management". mitsloan.mit.edu. Retrieved 2016-08-15.
- ↑ "The Contributions of Stewart Myers to the Theory and Practice of Corp…". archive.ph. 2013-01-05. doi:10.1111/j.1745-6622.2008.00200.x. S2CID 31095247. Archived from the original on 2013-01-05. Retrieved 2021-12-20.
- ↑ "Stewart (Stew) Myers - the Brattle Group". Archived from the original on 2011-07-08. Retrieved 2010-10-29.
- ↑ "American Finance Association Fellows". Archived from the original on 2010-04-20. Retrieved 2010-05-12.
- ↑ "Stewart C. Myers".
