Finance: Capital Markets, Financial Management, and Investment Management

By Frank J. Fabozzi and Pamela Peterson Drake

Overview

Published in 2009 by John Wiley & Sons as part of the Frank J. Fabozzi Series, this 833-page textbook provides an integrated treatment of the three core areas of finance: capital markets and capital market theory, financial management (corporate finance), and investment management. It is designed as a comprehensive reference for both students and practitioners seeking a rigorous understanding of modern financial theory and practice.

Key Themes and Arguments

Capital Markets and Theory

The first section establishes the theoretical foundations of capital markets, beginning with the mathematics of finance (time value of money, present value, yield calculations) and financial analysis fundamentals. It progresses through the structure of the financial system, interest rate determination, derivatives (futures, options, swaps), bond and stock valuation models, and asset pricing theory including the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT).

Financial Management

The corporate finance section covers the full spectrum of financial management decisions: forms of business enterprise, the objective function of the firm, agency relationships, capital structure theory (including the Modigliani-Miller propositions), capital budgeting techniques (NPV, IRR, payback period), financial engineering, asset securitization, project financing, and working capital management. The authors provide both theoretical frameworks and practical applications for each topic.

Investment Management

The investment management section addresses portfolio theory, equity analysis, bond portfolio management, alternative investments, and performance evaluation. It integrates modern portfolio theory with practical considerations of implementation, including transaction costs, taxes, and behavioral biases.

Quantitative Rigor

Throughout the text, Fabozzi and Drake maintain a quantitative orientation, providing mathematical derivations alongside intuitive explanations. The book includes extensive examples, end-of-chapter problems, and references to the academic literature.

Significance

This textbook serves as a comprehensive single-volume reference for the entire field of finance, making it particularly valuable for professionals seeking to broaden their knowledge beyond their area of specialization. Fabozzi's expertise in fixed income and structured products brings particular depth to the capital markets sections, while Drake's background in financial analysis strengthens the corporate finance and financial statement analysis components.