The field of economics is primarily concerned with the various forms of productive activities required to sustain the material and spiritual life of society. Real assets, such as capital goods, management and labour force, and so on, are necessary for producing goods and services required for the survival and prosperity of society.

The term capital denotes the economic value of the real assets of a society. In most developed economies, economic assets have a monetized form, and capital can be given a monetary value or paper form, called the money form of capital.

Finance is a branch of economics that studies the money (paper) form of capital. Uncertainty and risk are of fundamental importance in finance.

The main focus in this book is on financial assets and financial instruments. Financial assets, in contrast to real assets, are pieces of paper that entitle its holder to a claim on a fraction of the real assets, and to the income (if any) that is generated by these real assets. For example, a person owning a stock of a company is entitled to yearly dividends (if any), and to a pro rata fraction of the assets if the company liquidates.

What distinguishes finance from other branches of economics is that it is primarily an empirical discipline due to the demands of the finance industry. Vast quantities of financial data are generated every day, in addition to mountains of accumulated historical data. Unlike other branches of economics, the empirical nature of finance makes it closer to the natural sciences, since the financial markets impose the need for practical and transparent quantitative models that can be calibrated and tested.