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Finance, Economics, and Mathematics by Robert C. Merton, Oldrich A. Vasicek

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Part OneEfforts and Opinions

A lot of attention goes to the pricing of various complicated debt instruments because those instruments are becoming more common. That's needed short-term. I think long-term it's important to understand the more basic problem we were talking about before — what exactly goes into the pricing of the straight debt of a firm. That's the economics of credit, not the valuation of assorted derivatives. There is too much mathematics and too little economics in finance nowadays. That may sound funny coming from a mathematician, but nevertheless that's my opinion. We must not forget that the subject of finance is economic decisions”. (page 15)

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