FINANCIAL ECONOMICS
     Financial economics is a branch of economics that 
      analyzes  the  use  and  distribution  of  resources 
      in markets in  which  decisions  are  made  under 
      uncertainty. 
     Financial decisions must often take into account 
      future  events,  whether  those  be  related  to 
      individual stocks, portfolios or  the  market  as  a 
      whole.
     Financial economics often involves the creation of 
      sophisticated models to test the variables 
      affecting a particular decision.
   IMPORTANT OF FINANCIAL ECONOMICS
    
     Financial     economics has       many 
     aspects.        Two         of       the 
     most important are: 
     An important part           of finance is 
     working out the total risk of a portfolio 
     of risky assets, since the total risk may 
     be  less  than  the  risk  of  the  individual 
     components. 
     Financial economics builds heavily on 
     microeconomics  and  basic  accounting 
     concepts.
    THE PARTS TO THE FINANCIAL SYSTEM
     Money. Money is used as a medium to 
      buy goods & services.
     Financial Instruments. Financial 
      Instruments are formal obligations that 
      entitle one party to receive payments or 
      a share of assets from another party.
     Financial Markets. 
     Financial Institutions.
     Central Banks.
   COMPONENTS OF FINANCIAL 
   SYSTEM
    A modern financial system may 
     include banks (public sector or 
     private sector), financial 
     markets, financial instruments, 
     and financial services.
     Financial systems allow funds to be 
     allocated, invested, or moved between 
     economic sectors. 
    They enable individuals and companies 
     to share the associated risks.
   FUNCTION OF FINANCIAL 
   SYSTEM
    The financial system ensures the 
     efficient functioning of the payment 
     mechanism in an economy. 
    All transactions between the buyers and 
     sellers of goods and services are 
     effected smoothly because of financial 
     system. 
    Financial system helps in risk 
     transformation by diversification, as in 
     case of mutual funds.