 The objective of this module is to basically provide an introduction to the concept of financial economics. Financial economics is a branch of economics which deals with the allocation. Basically it explains how the allocation of funds is done in order to allocate the funds in their best possible use so that we can derive the maximum benefit out of it. It focuses upon the usage and the distribution of the different types of resources and when we say resources we are specifically talking about the financial funds, the capital, how the different forms of investments etc. So basically this particular module will explain how the various types of funds are allocated in their best possible usage so that we can derive the maximum benefit out of it and we cannot mix financial economics with economics because when we talk about economics it is the allocation of resources in their best possible use and when we talk about the resources or when we identify the various resources that are accounted for in economics it deals with all the various types of resources we have such as the physical resources, the minerals and the human capital but when we are dealing with financial economics it specifically deals with the financial resources. The financial resources comprises of the various types of funds, the bonds, stocks, the capital. We have physical capital, we have tangible assets, non-tangible assets so these kinds of all things are considered when we are dealing with the financial economics. So it is important to understand that financial economics deals with very important aspects such as uncertainty. It covers time and that is one of the basic variables that differentiates financial economics from economics that when we are allocating the resources in terms of economics we do not take into account time all the time so it is the time factor that plays a very crucial and important role in financial economics another important aspect which is associated with financial economics is that it talks about the risk which is due to uncertainty for example if I have invested some money in a bank today I don't know depending upon the economic conditions one year down the lane or after two years or three years they may change their rate of interest due to some policies developed by the government there may be a decrease in the interest rate or increase in the interest rate or there could be some other terms and conditions that can be there that can be tightening or relaxing. So when we talk about financial economics or allocation of financial resources we do have to consider firstly an important aspect that is the time factor. The next important thing is that it is subject to most of the decisions in financial economics which we have to undertake our subject to uncertainty then when we are allocating the financial resources we need to take into account another very important aspect that is the concept of opportunity cost. So opportunity cost is basically accounted for when we consider the monetary value of the next best possible option and that is another important dimension that we need to take into account when we are allocating our financial funds into various opportunities or options and then there is another important thing that is the type of information that is available when we are taking any decision in order to make allocation of funds then it is important to consider the various types of information that are there and if we do not know completely about a certain situation or the information is not completely given to us or provided to us or provided to any investor then there may be some issues or problems with the decision making it will not be a very appropriate or a rational decision. So the level of information and the type of information also plays a very crucial role when we are allocating funds or when we are dealing with financial economics another very important aspect is the concept of rationality. So previously we always believed and assumed that whatever financial decisions are carried out by the investors or by the financial analysts they always make it sure that whatever different type of information is available whatever type of information is available to you we have considered all the facts and with their help we are going to take a better decision in their light so that means the decision we are undertaking is rational but in fact it has been observed recently in particular that many of our financial decisions are irrational as well so we need to consider this aspect also. So basically financial economics deals with allocation of funds and it is subject to five major issues which have to be considered when we have to make better decisions in terms of allocation of funds and these are the time and the risk or the uncertainty the opportunity cost and the type of information that is available and whether the decisions were taken rationally or irrationally.