Theoretical Finance

Theoretical finance is the study of financial markets and instruments using mathematical models and theories. It seeks to understand how prices are determined, how investors make decisions, and how risk and return are related. By applying concepts from economics, statistics, and calculus, it provides frameworks for analyzing market behavior, pricing assets, and assessing risks. This discipline underpins many financial practices, including portfolio management and derivative pricing, helping professionals develop strategies to maximize returns while managing potential losses. In essence, theoretical finance combines theory and mathematics to make sense of complex financial systems.