Intermediate Financial Theory


  • Jean-Pierre Danthine, Vice-Chairman of the Governing Board at the Swiss National Bank in Bern, Switzerland
  • John Donaldson, Mario J. Gabelli Professor of Finance at Columbia University Business School, New York, NY, USA

Targeting readers with backgrounds in economics, Intermediate Financial Theory, Third Edition includes new material on the asset pricing implications of behavioral finance perspectives, recent developments in portfolio choice, derivatives-risk neutral pricing research, and implications of the 2008 financial crisis. Each chapter concludes with questions, and for the first time a freely accessible website presents complementary and supplementary material for every chapter. Known for its rigor and intuition, Intermediate Financial Theory is perfect for those who need basic training in financial theory and those looking for a user-friendly introduction to advanced theory.
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Advanced undergraduates and graduate students worldwide working on financial economics and the theory of finance.


Book information

  • Published: September 2014
  • ISBN: 978-0-12-386549-6


"This is an excellent book that introduces financial asset pricing theory as a natural extension of microeconomic and general equilibrium theory. The exposition of classic and recent results is clear, thorough and accessible to any economist or graduate student who has a good grounding in microeconomic theory. Having mastered this material the reader is well equipped to tackle the many variations of asset pricing models in the literature." --Frank Milne, Queen’s University, Professor of Economics and Finance "This book is ideally suited to students wishing to gain a deeper understanding of the basic concepts of financial economics beyond those presented in a typical MBA program without having to deal with unnecessary mathematical details. The exposition is superb and enriching of intuition. The book, written by two of the professions leading experts, is unique." -- Rajnish Mehra, Professor of Finance, University of California, Santa Barbara

Table of Contents

1. Role of Financial Markets

2. Challenges of Asset Pricing


3. Choices in Risky Situations

4.  Measuring Risk and Risk Aversion

5.  Risk Aversion and Investment Decisions, Part 1

6.  Risk Aversion and Investment Decisions, Part 2

7.  Risk Aversion and Investment Decisions, Part 3


8.   The CAPM

9.  Arrow-Debreu Pricing, Part I

10. The Consumption Capital Asset Pricing Model (CCAPM)

11. Arrow Debreu Pricing, Part II


12. The Martingale Measure in Discrete Time, Part 1

13. The Martingale Measure in Discrete Time, Part 2

14. The APT

15. Continuous Time Finance

16. Portfolio Management in the Long Run

17. Financial Structure and Firm Valuation in Incomplete Markets


18.  Financial Equilibrium with Differential Information