Money, it goes hand in hand with our materialistic ways. It is a motivation for members of our society to succeed. It keeps our economy going, even slowly. We make money and then we spend it. Finance brings a unique variable to the equation of making money. The idea of having your money work for you brings to mind the stock exchange. Chance and Peterson define finance as a young field (post World War II) that studies how money is acquired and invested (447). Finance practitioners are in an elite group. They are able to manipulate mathematics, physics, statistics, computers, trends, and risk. Due to social, economic and technological changes, the focus is on maximizing return on investments.
The post World War II economy invited a discipline like finance to emerge. It was a time of white collar jobs, women in the workforce, employment that provided services, corporations were forming, the “baby boomers” were born, families sought to purchase homes, and automobiles, then televisions, and then came computers. Besides the aforementioned social, economic and technological changes, a series of events took place to build finance into the discipline it is today.
Finance is the melting pot of mathematics, physics, computers and risk. Its’ main focus is on investing money and making a profit. In order to get to where we are today in finance, actual scientific theories were formulated and tested. The Gordon Model was used for pricing stocks (449). The equation for Brownian Movement was used for option pricing (449), which led to Stochastic Calculus and Ito’s Lemma (450). Then came Black-Scholes Model which led to new products of derivatives (451). The finance practitioners also used company fiscal forecast to predict the rise and fall of company stock prices. Ultimately these theories led to equations that could be used in finance and its profitability. The finance practitioners have found their niche in banks and brokerage firms using their skills to maximize profit.
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