Finance
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Depreciation
Depreciation is the decrease in the value of an asset due to wear and tear or obsolescence. It is calculated yearly to ensure realistic book values for assets.
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Insurance
Insurance is the undertaking of one party to indemnify another, in exchange for a premium, against a certain eventuality.
- Uninsurable risks
- Bad debt
- Changes in fashion
- Time lapses between ordering and delivery
- New machinery or technology
- Different prices at different places
- Requirements of an insurance contract
- Insurable interest
- The insured must derive a real financial gain from that which he is insuring, or stand to lose if it is destroyed or lost.
- The item must belong to the insured.
- One person may take out insurance on the life of another if the second party owes the first money.
- Must be some person or item which can, legally, be insured.
- The insured must have a legal claim to that which he is insuring.
- Good faith
- Uberrimae fidei refers to absolute honesty and must characterise the dealings of both the insurer and the insured.
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Shared Services
There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created.
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Finance of states
Country, state, county, city or municipality finance is called public finance. It is concerned with
- Identification of required expenditure of a public sector entity
- Source(s) of that entity's revenue
- The budgeting process
- Debt issuance (municipal bonds) for public works projects
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Financial economics
Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance.
It studies:
- Valuation - Determination of the fair value of an asset
- How risky is the asset? (identification of the asset appropriate discount rate)
- What cash flows will it produce? (discounting of relevant cash flows)
- How does the market price compare to similar assets? (relative valuation)
- Are the cash flows dependent on some other asset or event? (derivatives, contingent claim valuation)
Financial Econometrics is the branch of Financial Economics that uses econometric techniques to parameterise the relationships.
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Financial mathematics
Financial mathematics is a main branch of applied mathematics concerned with the financial markets. Financial mathematics is the study of financial data with the tools of mathematics, mainly statistics. Such data can be movements of securities—stocks and bonds etc.—and their relations. Another large subfield is insurance mathematics.
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Experimental finance
Experimental finance aims to establish different market settings and environments to observe experimentally and provide a lens through which science can analyze agents' behavior and the resulting characteristics of trading flows, information diffusion and aggregation, price setting mechanisms, and returns processes. Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions, and attempt to discover new principles on which such theory can be extended. Research may proceed by conducting trading simulations or by establishing and studying the behaviour of people in artificial competitive market-like settings.
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Quantitative behavioral finance
Quantitative Behavioral Finance is a new discipline that uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. Some of this endeavor has been lead by Gunduz Caginalp (Professor of Mathematics and Editor of Journal of Behavioral Finance during 2001-2004) and collaborators including Vernon Smith (2002 Nobel Laureate in Economics), David Porter, Don Balenovich, Vladimira Ilieva, Ahmet Duran, Huseyin Merdan). Studies by Jeff Madura, Ray Sturm and others have demonstrated significant behavioral effects in stocks and exchange traded funds.
The research can be grouped into the following areas:
1. Empirical studies that demonstrate significant deviations from classical theories.
2. Modeling using the concepts of behavioral effects together with the non-classical assumption of the finiteness of assets.
3. Forecasting based on these methods.
4. Studies of experimental asset markets and use of models to forecast experiments.
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Intangible Asset Finance
Intangible asset finance is the area of finance that deals with intangible assets such as patents, trademarks, goodwill, reputation, etc.
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Related Professional Qualifications
There are several related professional qualifications in finance, that can lead to the field:
- Qualified accountant qualifications: Chartered Certified Accountant (ACCA, UK certification), Chartered Accountant (CA, certification in Commonwealth countries), Certified Public Accountant (CPA, US certification)
- Non-statutory accountancy qualifications: Chartered Cost Accountant CCA Designation from AAFM
- Business qualifications: Master of Business Administration (MBA),Bachelor of Business Management (BBM), Master of Financial Administration (MFA), Doctor of Business Administration (DBA)
- Finance qualifications: Chartered Financial Analyst (CFA),Certified International Investment Analyst(CIIA), Association of Corporate Treasurers (ACT), Masters degree in Finance, Certified Market Analyst (CMA/FAD) Dual Designation, Master Financial Manager (MFM), Corporate Finance Qualification (CF) Register Financial Planner (RFP), Certified Financial Consultants (CFC)
- Quantitative Finance qualifications: Master of Science in Financial Engineering (MSFE) ,Master of Quantitative Finance (MQF), Master of Computational Finance (MCF), Master of Financial Mathematics (MFM)
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See also
- Main lists: List of basic finance topics and List of finance topics
- Behavioral finance
- Bridge financing
- Economic calendar
- Financial plan
- Financial planning
- Financialization
- Forex
- Funding, a synonym of financing
- Important publications in finance
- Payday loan
- Right-financing
- Settlement (finance)
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External links
- Wharton Finance Knowledge Project - aimed to offer free access to finance knowledge for students, teachers, and self-learners.
- For material covering three areas in finance - corporate finance, valuation and investment management, see Prof. Aswath Damodaran
- For links to finance web sites, grouped by topic see Web Sites for Discerning Finance Students, Prof. John M. Wachowicz-
- For the introductory finance web site at the University of Arizona, studyfinance.com
- For introductory articles, a full glossary and links to resources on behavioral finance see the BF gallery
- For the law of the financial markets see SECLaw.com
- For stock market related financial definitions see TheStreet.com Glossary
- The Finance Director provides access to essential suppliers of financial services and solutions
- Director of Finance Online features news and industry information specific to senior finance professionals within the UK
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